When a company is liquidated, all its assets are sold to repay creditors before the company is permanently closed. The liquidator is appointed to oversee the business and investigate the reasons for its failure.
While the liquidation of a business does not necessarily prohibit one from starting a new company, it is important to note that there are strict regulations surrounding the reuse of a company’s name. Business failure is often due to factors beyond the control of the company directors, such as a decline in the overall market.
Despite these regulations, there may be reasons why one would want to reuse a previous company name. However, it is important to proceed with caution and ensure compliance with all applicable laws and regulations.
Benefits of Reusing a Liquidated Company’s Name
Reusing a previous company name, or a similar one, when starting a new business after liquidation can provide the advantage of a recognizable commercial entity, enabling a quick start to the business.
By utilising the goodwill that the old company generated, there is no need to build a new brand from scratch. However, it is essential to consider the potential drawbacks of reusing a company name, since the regulations are stringent.
Failure to comply with these rules can lead to severe consequences such as personal liability for the debts of the new company, financial penalties, and even imprisonment in extreme cases. Therefore, it is crucial to be fully aware of the possible ramifications of any decisions regarding the reuse of a company name.
Using the Same Company Name After Liquidation: What You Need to Know
Section 216 of the Insolvency Act of 1986 provides detailed regulations on the reuse of company names, with the primary purpose of preventing fraudulent activities by dishonest directors who attempt to deceive former creditors or the general public.
To accomplish this goal, the rules prohibit the reuse of the same or a similar company name following liquidation, but there are a few exceptions to this regulation.
Regulations Governing the Reuse of Company Names: An Overview
According to the Insolvency Act, the reuse of limited company names is generally not permitted, except in three specific situations:
Obtaining permission from the court:
If you seek court leave and receive official authorization to use the same or a similar name, you may be allowed to reuse the name of your liquidated company. This application must be made within seven days of the liquidation.
Buying business assets from the liquidator:
If you purchase the entire or substantially all of the business assets from the liquidator, you may be permitted to reuse the company’s name. However, it is essential to inform the creditors of the liquidated company about the name reuse and advertise it in the Gazette.
Using an existing name:
If the company had used the name for a minimum of 12 months before liquidation, and the company was not dormant during that time, you might be allowed to continue using the name.
Using a company name in any way outside of these three scenarios may result in serious consequences for you and other directors. InsolvencySupport.co.uk offers free consultations to determine whether it is legal to reuse a company name, with an extensive network of offices throughout the country.