Section 216 — re-using a company name after insolvency

Section 216(1) IA 1986 applies where:

• ›A company has gone into insolvent liquidation (CVL or compulsory liquidation — not solvent MVL, not administration).
• ›A person was a director or shadow director of that company at any time in the 12 months ending with the start of liquidation.

Section 216(2) then prohibits the person, for 5 years from the start of liquidation, from being involved in the management of any other company using a 'prohibited name'. A prohibited name is the name of the liquidated company, or a name so similar as to suggest an association with it. The prohibition catches being a director, being a shadow director, being concerned in the management, and being concerned in the formation of a company with a prohibited name.

Section 216 is broader than just identical names. 'Similar' names that suggest association are caught. Examples that have been treated as prohibited:

• ›'ABC Construction Limited' liquidated; 'ABC Construction Services Limited' is prohibited.
• ›'Smith & Sons Joinery Limited' liquidated; 'Smith Joinery (Holdings) Limited' is prohibited.
• ›'Premier Cleaning Limited' liquidated; 'Premier Cleaning Group Limited' is prohibited.
• ›'XYZ Trading Limited' liquidated; 'X.Y.Z. Trading Limited' is prohibited.

The Court takes a substantive view. Cosmetic changes — additional words, punctuation, format — don't avoid the prohibition. The test is whether the names would suggest association to a reasonable observer.

• ›s.216(4) — criminal offence. Summary conviction: up to 12 months' imprisonment and/or fine. On indictment: up to 2 years' imprisonment and/or fine.
• ›s.217 IA 1986 — civil personal liability. The director is personally liable for all 'relevant debts' of the new company — typically meaning all debts incurred while they were involved in management.

Section 217 liability is severe. The director becomes personally liable for the entire trading debt of the new company — not just for damages caused by the breach. If the new company has £500,000 of trade debt accumulated during the period of breach, the director is personally liable for the full £500,000.

Exception 1 — The 'successor company' / Rule 22.4 notice

Where a new company acquires the whole or substantially the whole of the business of the liquidated company from the liquidator or administrator, the new company can use the prohibited name if notice is published in the London Gazette and given to creditors of the liquidated company within 28 days of completion. The notice states the names of the directors of the new company, the prohibited name being used, and the details of the acquisition. This is the most common lawful route.

Exception 2 — Court permission / Rule 22.5

The director can apply to the Court for permission to be involved in a company with a prohibited name. The application must be made within 7 days of the liquidator's notice or of the director becoming involved in the new company. The Court has wide discretion — typical considerations: was the director involved in the failure of the previous company? Are creditors of the previous company being prejudiced? Is the new company genuinely a successor business?

Exception 3 — Existing use / Rule 22.6

Where the new company has used the prohibited name continuously for 12+ months before the liquidated company entered liquidation, and was not dormant at any point in that period, the director can continue to be involved. This catches pre-existing legitimate businesses that happen to have similar names.

• ›New company acquires the business from the liquidator (or administrator) at proper market value — independent valuation typically required.
• ›Notice in the London Gazette — specific format required per Rule 22.4. Typical cost £80–£120 for advertising.
• ›Notice to known creditors of the liquidated company — typically by post to addresses from the Statement of Affairs creditor list.
• ›28-day deadline from completion of the business acquisition. Late notices breach s.216 even if all other requirements met.
• ›Form and content must clearly identify the prohibited name, the directors involved, the liquidated company, and the acquisition details.

The notice itself doesn't trigger creditor objection rights — creditors can't 'block' it. But it does inform creditors that the business has continued under the same name with the same directors, which may inform their conduct in the liquidation (closer scrutiny of the sale price, challenges to the value paid for the business).

• ›Solvent liquidation (MVL) — s.216 applies only to insolvent liquidation. Directors of MVL companies can use the name freely afterwards.
• ›Administration — s.216 applies to liquidation, not administration. Where a company exits administration via CVL, s.216 applies from the CVL commencement date.
• ›Strike-off — s.216 doesn't apply to companies dissolved by strike-off (though the dissolved-company investigation powers under the 2021 Act may still apply).

For the broader question of when phoenix arrangements are lawful or abusive, see Phoenix companies — when are they legal?. For BBL implications of phoenix arrangements, see BBL personal liability. For director disqualification consequences, see Director disqualification.