Insolvency Service Publishes Overview

The Insolvency Service has published an overview relating to the restrictions on the re-use of a name previously used by a liquidated company.

The Insolvency Act 1986 restricts the re-use of a name previously used by a company that has gone into liquidation. This restriction applies personally to a director of the company in liquidation. The name which can’t be used is known as the ‘prohibited name’.

For five years from the date of liquidation, a director of a liquidated company is not permitted to be a director of or take part in the promotion, formation or management of a limited company that is using a prohibited name. He may also not take any part in carrying on a business that is using a prohibited name if the business is not a limited company (for example, if it is a partnership or sole trader).

There are three exceptions to the restrictions on the re-use of a prohibited name:

(i) on the sale of the business; or

(ii) with the permission of the court; or

(iii) if he is a director of another company that has used the prohibited name continuously for 12 months up to the date of liquidation.

A director in contravention faces prosecution and a possible prison sentence and could be made personally liable for the debts incurred during the time that he was involved in managing a business using a prohibited name, even if it was a limited company.

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