Published: 02/01/2019 By Lindsey MooreDirectors of insolvent companies often ask us about whether they can re-use the name of the insolvent company for a new business.
The Insolvency Service has recently published new guidance for directors on this subject.
The restrictions set out in the Insolvency Act 1986, apply to all directors of a company that has entered into insolvent liquidation, whether or not there has been any misconduct or dishonesty in relation to the failure.
So, if you are a director of a company at any time in the 12 months before it goes into insolvent liquidation you are not allowed to be a director of, or take part directly or indirectly in the promotion, formation or management of a company, or to carry on a business, with the same or similar name to the liquidated company for a period of 5 years. This same or similar name is known as a prohibited name.
There are exceptions to the ban, but unless one of those exceptions applies you may be prosecuted (and if convicted, imprisoned or fined), disqualified from acting as a director and/or made personally responsible for debts incurred during the time you managed the business with a prohibited name.
If you are worried that you might be currently using a prohibited name or are thinking about re-using a similar company name and are unsure of whether the exceptions will apply to you, you should seek professional advice as soon as possible.