Insolvency

Getting advice as early as possible is key to finding the best solution for you

Karen Adams

Head of Commercial Recoveries

Insolvency

Prohibited names

Often when a business becomes insolvent, the directors set up a new company to take over the business of the insolvent company, and the new company has a similar name or makes use of the old trading name in order to maintain the goodwill of the old business. However, directors need to be aware of the rules aimed at phoenixed businesses which rise from the ashes of previous failed businesses. When a company goes into liquidation, the directors must make sure that they do not act as directors of a company with a prohibited name for the following 5 years. If they do so, they could be subject to both personal liabilities for the debts of the successor companies and criminal sanctions. There are certain exceptions to the general rule. We can advise directors as to how to come within the exceptions and if it is not possible, what action to take to avoid falling foul of the rules.

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