If your company has been liquidated and you’re considering a new venture, it can be tempting to continue trading under the same, or a similar, name. This is often the case where the new business will operate in the same sector or offer similar services.

Before doing so, it’s important to understand the restrictions that apply. These are set out in section 216 of the Insolvency Act 1986, and they can have serious implications if overlooked.

What section 216 means in practice

Where a company enters insolvent liquidation, anyone who acted as a director or shadow director in the 12 months leading up to that point is restricted from forming, promoting or managing a business using the same or a similar name.

Once liquidation takes place, the name becomes a prohibited name. This includes:

• The registered company name at liquidation
• Any trading name used in the previous 12 months
• Any name considered similar enough to suggest a connection or cause confusion

These restrictions apply whether the new business is incorporated or not, and they remain in place for five years following liquidation.

Why the rules exist

These rules are designed to prevent a situation where a company builds up debt, enters liquidation, and then effectively carries on trading under a new entity with a similar name. This can leave creditors unpaid and create the impression that nothing has changed.

This practice is often referred to as ‘phoenixism’, and it is treated seriously. Breaches of section 216 can lead to significant consequences, including personal liability for the new company’s debts, financial penalties, and in the most serious cases, imprisonment.

The aim is not to prevent genuine business recovery, but to ensure transparency and fairness for creditors.

When re-using a name may be allowed

There are three specific circumstances where re-using a prohibited name may be permitted.

Purchasing the business from the liquidator

If the new company acquires all, or a substantial part, of the business from the liquidator, the name may be re-used. This is only possible if certain steps are followed, including notifying all creditors within 28 days and publishing a notice in the London Gazette.

Only once these requirements are met can the director be appointed to the new business using the similar name.

Court permission

Directors can apply to the court for permission to re-use the company name. Applications must be made within seven days of liquidation and should demonstrate that the new business is financially viable and appropriately managed.

The name can be used while the court considers the application, for up to six weeks.

Existing use

If another company has already been trading under the name for at least 12 months prior to the liquidation, and has not been dormant during that period, it will usually be able to continue using it.

Taking advice early

Getting this wrong can be costly, both financially and personally. A lack of awareness is not accepted as a defence, so it’s important to take advice before forming a new company or committing to a trading name. If you are considering starting again after liquidation, or are unsure whether a proposed name may cause issues, an early conversation can help you understand your options and avoid unnecessary risk.

bk plus supports directors through liquidation and beyond, providing practical advice based on real-world experience. We can help you close a company properly and ensure any new venture is set up in a way that is compliant and sustainable from the outset.

Clear advice, based on experience, when it matters most.