How can we reuse the liquidated company's name?- Use one of the exceptions to Section 216 Insolvency Act 1986
If your company has gone into liquidation it is possible to reuse what is otherwise a prohibited name if your successor company's name falls within or is made to fall within one of the three exceptions to Sections 216 and 217 of The Insolvency Act 1986.
The three exceptions to the general rule, that a successor phoenix company cannot re-use the original registered name or trading name of a previous company that has gone into insolvent liquidation, are set out at Rules 22.4, 22.6 and 22.7 of the Insolvency (England & Wales) Rules 2016. Those Insolvency Rules address what are known as "the three excepted cases".
Exception 1 - Rule 22.4
Rule 22.4 of the Insolvency (England & Wales) Rules 2016 - The first exception that will allow your company to reuse the name of an insolvent company that is otherwise a prohibited name
This is possibly the most important exception to reusing a company name in a phoenix company. Where a NewCo (the successor company) acquires the whole, or substantially the whole, of the business of an insolvent company, under arrangements made by an insolvency practitioner acting as its liquidator, or administrator, the successor company may, for the purposes of section 216, give notice under this Rule to the insolvent company's creditors.
The notice procedure to advise third parties that the old company’s registered name or trading name is to be reused by a successor phoenix company is very strict. A notice under Rule 22.4 and 22.5 must be sent to:
- The London Gazette within a set time period of 28 days from the completion of the purchase of the name and assets from the liquidator of the predecessor company and
- Every creditor of the previous insolvent company.
By following this procedure directors of the successor phoenix liability avoid the various penalties for using a prohibited company name - imprisonment, fine and personal liability for all of the debts of NewCo.
In other words if you do not follow the Rule 22.4 procedure to the letter then it is just the same as if your phoenix company was trading without the benefit of limited liability.
Exception 2 - Rule 22.6
Rule 22.6 of the Insolvency (England & Wales) Rules 2016 - The second exception that will allow your company to reuse a name of an insolvent company that is otherwise a prohibited name
This second exception involves the directors of the successor phoenix applying to Court for permission (or "leave" as the Court calls it) to reuse the name of the insolvent company. The application to Court must be made no later than 7 days from the date on which the company went into liquidation, and leave must be granted by the Court no later than 6 weeks from that date.
This begs the question as to whether the Court gives permission to reuse the name of the insolvent company name in every case. Several Court reports demonstrate that the Court looks at the matter seriously. Before the Court will give leave the Court looks to see if:
- The successor company is well capitalised or not
- Has adequate bank or other working capital
- Has a competent financial team.
So if you start a phoenix company on a financial shoestring you will not necessarily get permission from the Court to reuse the old insolvent company's registered or trading names in a successor phoenix company.
Exception 3 - Rule 22.7
Rule 22.7 of the Insolvency (England & Wales) Rules 2016 - The third exception which will allow your company to reuse a name of an insolvent company that is otherwise a prohibited name
The name of the insolvent company can be reused in any event if the company, though known by a prohibited name:
(a) has been known by that name for the whole of the period of 12 months ending with the day before the liquidating company went into liquidation, and
(b) has not at any time in those 12 months been dormant within the meaning of section 252(5) if the companies Act.
In other words if you have five existing companies such as John Brown Falmouth Ltd, John Brown Truro Ltd, John Brown Ltd Newquay Ltd. John Brown Helston Ltd and John Brown Plymouth Ltd then if one of those companies is placed into insolvent liquidation the other companies within the group can continue to use the "John Brown" moniker provided that they have each been trading for the entire previous 12 month period.
For case law on this topic of reusing insolvent company names click on the headings in the left hand index.
We can explain more about how to satisfy these Insolvency Rules concerning the reuse of a company's registered and trading names by a successor phoenix company to a liquidated company and in that regard please ring Chris Parkman on 01326 340 579 or email him at firstname.lastname@example.org.
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