Section 216 IA86 - Re use of Company name
Posted on 3rd April 2019 at 10:59
Below I have detailed the statute that relates to this section of the Act, however, in plain terms the restrictions are there to police a company entering into an insolvency procedure and then commencing to trade a new company with the same name or one such similar to assume association.
In recent times, this area of Insolvency has been increasing monitored by the Insolvency Service and as you can see below the repercussions of not adhering to the law can have serious consequences for the directors personally. That is not to say however that it is not possible but the procedure needs to be followed and I would urge anyone considering re using a company name or trade mark to seem independent legal advice regarding the process.
In addition to the notifications that need to be made, it also needs to mentioned that should the trading name, assets, goodwill etc associated with the company have a certain value, then fair price will also need to be paid for the re-use of the name going forward. An independent valuer would need to be instructed to advise on such fair price.
Every situation is unique, in some situations the continuation of the name may have significant advantages for the new company and therefore the directors may come to the conclusion that adhering to the legislation and the financial implications of this are in the best interests of the new company, however, consideration should also be given as to the perception of the phoenix operation to the insolvent companies creditors, will this have an adverse effect of continuing business relationships?
This section applies to a person where a company (the liquidating company) has gone into insolvent liquidation on or after the appointed day and he was a director or shadow director of the company at any time in the period of 12 months ending with the day before it went into liquidation.
(2) For the purposes of this section, a name is a prohibited name in relation to
such a person if -
(a) it is a name by which the liquidating company was known at any time in that period of 12 months, or
(b) it is a name which is so similar to a name falling within paragraph (a) as to suggest an association with that company
(3) Except with leave of the court or in such circumstances as may be prescribed, a person to whom this section applies shall not at any time in the period of 5 years beginning with the day on which the liquidating company went into liquidation -
(a) be a director of any other company that is known by a prohibited name, or
(b) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company, or
(c) in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on (otherwise than by a company) under a prohibited name.
(4) If a person acts in contravention of this section, he is liable to imprisonment or a fine, or both.
(5) In subsection (3) the court means any court having jurisdiction to wind up companies; and on an application for leave under that subsection, the Secretary of State or the official receiver may appear and call the attention of the court to any matters which seem to him to be relevant.
(6) References in this section, in relation to any time, to a name by which a company is known are to the name of the company at that time or to any name under which the company carries on business at that time.
(7) For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.
(8) In this section company includes a company which may be wound up under Part V of this Act.
Tagged as: Information for Directors
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