What’s In a Name? Understanding Phoenixism and the Insolvency Act


Date Published: 23rd November 2022

What’s In a Name? Understanding Phoenixism and the Insolvency Act

One of the many responsibilities of a limited company director is to ensure their company is run in accordance with the Insolvency Act 1986 at all times; this requirement becomes all the more important when financial difficulties lead to the company facing liquidation.

Whilst being the director of a liquidated company does not ordinarily prevent that individual from starting up a new business in the future, when it comes to choosing the trading name of the new company, the Insolvency Act’s stance on phoenix companies must be dutifully complied with. Opting for the same
name, or a name so similar it suggests an association with the liquidated business is a serious matter that could land the director in hot water. The rules surrounding phoenixism have recently been thrust into the spotlight, thanks to a High Court case involving an aborted attempt to sail round the world and a yacht seller found guilty of breaching the Insolvency Act. Defects in a yacht purchased from Discovery Yacht Sales led to the Court of Appeal finding the director of the company guilty of breaching the Insolvency Act 1986 by continuing to use the brand name of a previously liquidated company.

Background to the case

After purchasing a sailing yacht for £1.5 million in January 2017, the plans of an adventurous couple were scuppered when a series of defects with the vessel were discovered. The owners of the yacht successfully sued seller Discovery Yachts Sales Ltd (DYS) as well as another company, Discovery Yachts Group, which was responsible for carrying out repairs on the boat after taking over DYS following its liquidation in 2019.

After a trial in the High Court, the couple were awarded £1.1 million in compensation. This was later taken to the Court of Appeal, where not only was the judgment upheld, but the judge made Discovery Yachts Group’s director personally liable for this seven-figure sum. The director was said to have unwittingly breached the Insolvency Act in his use of the Discovery Yachts brand following the liquidation of Discovery Yachts Sales Ltd.

The importance of professional advice

The case serves as an expensive lesson in why ensuring compliance with the Insolvency Act is of paramount importance for those who operate limited companies as well as their advisers – not least when it comes to the requirements of s216 of the Insolvency Act regarding the reuse of a company’s name following liquidation.
If you have a client considering incorporating a phoenix company, or if they are on the brink of insolvency and assessing their options, your local Begbies Traynor partner is on hand to give you both the specialist advice and guidance you need during this time. We can talk you and your client through their options, while ensuring any steps taken comply with the Insolvency Act.

Begbies Traynor will continue to support accountants whose clients are concerned about their businesses’ viability. We offer a free initial consultation with one of our licensed corporate insolvency specialists at a time convenient to you and offer total confidentiality. In many cases we can provide this service on the same day we are contacted.

Please get in touch for more information.


About the author

Julian Pitts

Regional Managing Partner

Meet our Team of Experts

Following graduation from the University of Hull, Julian qualified as a Chartered Accountant with Coopers & Lybrand in Leeds. In 1989  he was the joint founder of Wilson Pitts, a specialist independent practice dealing with all aspects of insolvency and corporate recovery work.  Subsequently in 2006, the Wilson Pitts practice was acquired by Begbies Traynor where Julian is now the Regional Managing Partner for the North-East region.

Julian has significant experience in advising SMEs and their stakeholders, seeking innovative solutions to financial challenges.

With family roots in Devon, Julian has been a life-long supporter of Plymouth Argyle and he also spends time rallying a Mk1 Lotus Cortina as well as trying to reduce his golf handicap.

Network of Over 100 UK Offices

Find your local Begbies Traynor Group office and speak to an adviser today.

Find your Local Office
0800 063 9221

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0800 464 0871

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0161 837 1700

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
Begbies Traynor Group plc, announces that it has completed the acquisition of CVR Global LLP
CVR is a leading independent firm of insolvency practitioners, forensic accountants and experts in other related complementary disciplines.
Read More →
 
Coronavirus pushes financially distressed companies over the half-million mark
Number of businesses in significant distress stands at 509,000 – the highest number measured by the Red Flag Alert research
Read More →
 
BTG Advisory accelerates growth with appointment of four new partners to its London office
BTG Advisory, the boutique advisory arm of Begbies Traynor Group announces the appointment of four new partners to its Canary Wharf office
Read More →
 
Eighty jobs saved with £1m sale of engineering business
South Yorkshire company Newburgh Precision rescued through administration
Sale enables 75-year-old business to continue trading
Read More →
 
Join thousands of professionals by signing up for our updates
Analysis and Opinion from our Partners
Top Industry News
Register Now →
 

Advice you can trust

We are accredited by the following industry leading organisations

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ICAS | The Institute of Chartered Accountants of Scotland

Contact the Begbies Traynor Group team

or Find your Nearest Office

Here at Begbies Traynor Group we take your privacy seriously and will only use your personal information to contact you with regards to your enquiry. We will not use your information for marketing purposes. See PRIVACY POLICY

Processing...

This site uses cookies to monitor site performance and provide a more responsive and personalised experience. You must agree to our use of certain cookies. For more information on how we use and manage cookies please read our PRIVACY POLICY