Re-Use of Company Name Law - Insolvency law library

 

Without more it is illegal for a phoenix company to re use (reuse) the name of a previous insolvent company that was placed into liquidation. The following case examines the circumstances of a particular matter to determine if the severe penalties imposed by Sections 216 and 217 of The Insolvency Act 1986 applied.

 

THORNE - v - SILVERLEAF

Liability for debts under the Insolvency Act 1986, Sections 216, 217.

a. Facts

(i) T was the Director of three companies over a period of 25 years:

  1. Mike Spence (Reading) Limited
  2. Mike Spence (Motorsport) Limited
  3. Mike Spence Classic Cars Limited

 

(ii) The first two of these three companies had previously gone into liquidation with T as a Director. The third company was then formed and substantial monies procured from S under an oral joint venture agreement.

(iii) S began to take a closer interest in the running of the company, attending 9 or 10 monthly meetings.

(iv) On default of the agreement, S demanded the drawing up of an accountants report on the company which put T's indebtedness to S at £135,000. S obtained Summary Judgement against the company and T personally under Sections 216 and 217 of the Insolvency Act 1986.

b. Held per Peter Gibson LJ

(i) The name of the company was so similar to the previous two as to make it a prohibited name under Section 216 (2).

(ii) As T was a director of the first two companies in the 12 months preceeding their liquidation and went on within five years of their liquidation to be a director in a company with a prohibited name, he was liable to criminal sanctions under Section 216 (4).

(iii) T as a person involved in the management of a third company was jointly and severally liable for its liabilities incurred at the time of his involvement, along with the company and any other persons liable (Section 217).

(iv) Although the sections go further than is required to curb the ' Phoenix Syndrome' the Court has no discretion to withhold their application.

(v) T's argument that S is aiding and abetting the crime should be precluded by public policy from profiting from his own wrong, was rejected for three reasons:

  1. Public policy will not automatically intervene in every crime or wrong committed by a person.
  2. S had not profited as he was entitled to the debt in any event. 
  3. In any event, S had not, in the view of the Court, aided and abetted as he had only participated in the mangagement of the company to the extent that many institutional lenders would to monitor a loan.

To view a further case in relation to re-use of company name - Re: Bonus Breaks Limited - please click here.

 

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