The rules over the re-use of ‘prohibited names’ in company insolvency are an absolute minefield.
I believe there is a ticking timebomb sitting under quite a few of the UK’s directors who tried again following liquidation, who despite having no malice or intention to do any wrong are nevertheless personally exposed right now not only criminally but also to be made personally bankrupt. It’s only a matter of time before HMRC pick up on this, trawling those sectors where the re-use of company names post liquidation is common – eg pubs, restaurants – and go hunting for cash.
And there is of course the other ticking timebomb – of a liquidator taking action against you, and reporting you to the Insolvency Service, for a breach of s216. If you liquidated a business previously and are now thinking about doing it again, did you follow the rules to the letter last time? I’ve seen many IPs who promised prior to liquidation they’d act as liquidator for a fixed or low fee only for them to turn to the directors after they’d been appointed and ask for significant sums from the directors personally because s216 had been breached. The reality is while they are doing the job they are supposed to do once they’ve been appointed as liquidator (to look after the interests of the creditors), they didn’t do their job in advising the directors properly at the pre-liquidation stage.
You will recall from one of my previous blogs that I provided a link to the Insolvency Service’s summary of the law – here’s that link again, click here, updated last in November 2019. If you’re a director of a limited company that’s at risk of going into creditors voluntary or compulsory liquidation and you’re thinking of having another go, read this summary. It’s absolutely vital that you do so.
I’ve also found another short summary by experienced lawyers Keystone Law. Here’s a link, click here. Nice and short. Print it out, take it to your lawyer / IP and discuss it, in detail, before you make any decisions or commit over any liquidation.
So why am I writing right now?
Well, the Insolvency Service have just issued an updated form that needs completing to get approval under the first of the exceptions. Click here to go to it. Call me cynical, but the Insolvency Service do not re-issue forms almost 35 years after the law was brought in if there wasn’t some form of deficiency in the old form, one that saw someone who relied on it hurt.
As Keystone Law say in their article, take professional advice, and indeed take action, early – there are some very strict immovable deadlines, this is something that should never be ignored when you’re liquidating a company.