Phoenix from the Flames? The Criminal Risks of Re-Using Company Names After Insolvency (and the Narrow Exceptions)

by | Sep 10, 2025 | Director Disqualification

Many honest directors are tripped up by the rules on re-using a company name after liquidation. In sectors where the trading name is the business, such as pubs, restaurants, hotels, engineering firms, retailers, the temptation to ‘carry on as before’ is huge. But doing so without following the law to the letter is a criminal offence and creates automatic personal liability for the phoenix’s debts.

The core rule (sections 216–217 Insolvency Act 1986)

If your company goes into insolvent liquidation and you were a director (or shadow director) in the previous 12 months, you are barred for five years from being a director of, or concerned in the management of, another business with the same or a similar (‘prohibited’) name, unless an exception applies or the court gives permission. Legislation.gov.uk

If you breach that restriction, liability is automatic:

‘A person is personally responsible for all the relevant debts of a company if… in contravention of section 216, he is involved in the management of the company.’ (s.217(1)(a) IA 1986). Those debts are joint and several with the company. Legislation.gov.uk

Creditors do not need a special court order to make you liable. Recent appellate authority confirms that a judgment against the phoenix can itself establish the ‘relevant debt’ when pursuing the director under s.217. LexisNexisCharles Russell Speechlys

Breaching s.216 is also a criminal offence (imprisonment and/or fine). Legislation.gov.uk

The three narrow exceptions — and what they actually require

If you miss any step, you are in breach. The devil is in the detail: partial compliance doesn’t count.

1) Court leave (Rule 22.6) — strict timing and sensible evidence

  • Apply within 7 business days of liquidation to preserve a short ‘safe’ window to trade while the court decides (maximum six weeks from liquidation or until the court’s decision, whichever is sooner). If you apply late, you cannot use the name until leave is granted. Legislation.gov.ukGOV.UK

  • What to include in your application (good practice):

    • Background to the failure and why reuse is in creditors’ interests (not yours!).

    • Evidence of financial standing of the phoenix (working capital, facilities, realistic forecasts).

    • Governance controls and steps to distinguish the phoenix from the failed company (clear branding, disclosures, fresh stationery/website).

    • Impact on creditors if leave refused.

    • Notice to the Secretary of State at least 14 days before the hearing (the Insolvency Service may appear). Legislation.gov.uk

    • Send a copy to the Insolvency Service s.216(3) team (address/email on GOV.UK). GOV.UK

If the court hasn’t ruled by week six, the temporary permission lapses and you must stop using the name until leave is granted. GOV.UK

2) Business purchase/notice to creditors (Rule 22.4) — the ‘Gazette + creditors’ route

This applies where the whole or substantially the whole of the insolvent company’s business is acquired under arrangements made by the liquidator (or by an administrator/AR/CVA supervisor before liquidation). To rely on it, before you act you must:

  • Publish a notice in the London Gazette, and

  • Send the same notice to every known or reasonably ascertainable creditor.
    Both must be done no later than 28 days after completion of the sale (and, in any event, before you act). You cannot use this route if you’ve already breached. Legislation.gov.uk+1

Mandatory contents of the notice include: company identification details; your name/address; the prohibited name; a statement of your intention to act in one or more of the s.216(3) ways in connection with the whole or substantially the whole of the business; and the statutory warnings that breach is a criminal offence. The notice must also include the statement set out in Rule 22.5. There’s a government template for this. Legislation.gov.uk+1

Trip-wire: If what you acquire is less than ‘the whole or substantially the whole’ of the business, this exception does not apply – you will need court leave instead. GOV.UK

3) Continuous use by an existing company (Rule 22.7) — strictly interpreted

No leave is needed where the successor company has:

  • been known by the same or similar name for the entire 12 months ending the day before the old company’s liquidation; and

  • has not been dormant at any time in that 12-month period (per Companies Act s.1169). Legislation.gov.uk

It must be active trading throughout; a shell or dormant company won’t do. The name must be in continuous use – gaps or rebrands can defeat the exception. GOV.UK guidance reflects this strictly. GOV.UK

‘We weren’t warned’ is not a defence

Some liquidation factories – and yes, even some larger firms – don’t explain s.216/217 clearly. But ignorance is irrelevant. Breach is strict liability, as confirmed in authorities such as R v Copp and Re Purpoint. Courts have imposed six-figure liabilities on directors who thought their breach was ‘innocent.’ You can search case law on BAILII. Charles Russell Speechly

Criminal time limits (don’t bank on it ‘Going away’)

Unlike most summary offences, the Insolvency Act provides an extended window: summary proceedings may be brought within 3 years of the offence and within 12 months of sufficient evidence coming to the knowledge of the DPP or Secretary of State (IA 1986, s.431). In short, this doesn’t ‘expire’ quickly. Legislation.gov.uk

Practical guidance for directors

  • Do not use the old name (or anything confusingly similar) unless you either have court leave or fit an exception exactly.

  • If buying the business, serve the Rule 22.4 notice on all creditors and Gazette it before you act, and within 28 days of completion. Keep proof of service and publication. Legislation.gov.uk

  • If relying on the 12-month exception, make sure the company traded continuously under that name for the full year and was never dormant. Legislation.gov.uk

  • Rebrand if in doubt –  it’s cheaper than personal liability for all debts.

  • Minute decisions carefully and take advice early.

A word to suppliers and other creditors

If you’re supplying the phoenix of a long-established business and arrears build, check s.216/217. If directors are trading under a prohibited name without leave/exception, s.217 gives you a route to pursue them personally for debts incurred during the breach – no separate order required. Consider the recent PSV v Langdon line of authority when assessing recovery prospects. Charles Russell SpeechlysLexisNexis

Takeaway checklist

✅ Understand that s.217 liability is automatic once s.216 is breached. Legislation.gov.uk
✅ For the court-leave route: apply within 7 business days; expect the court to test capital, governance and creditor protection; notify the Secretary of State. Legislation.gov.uk+1
✅ For the business-purchase route: Gazette and serve every known/ascertainable creditor with a compliant Rule 22.4 notice before you act and within 28 days of completion. Legislation.gov.uk
✅ For the 12-month use route: continuous use by an active company for the entire year – no dormancy. Legislation.gov.uk
✅ Remember the extended 3-year criminal time limit (s.431). Legislation.gov.uk
✅ When in doubt: rebrand or seek leave – half-measures = breach.

If you’re contemplating a restart where the name really matters (pubs, restaurants, hotels, engineering, retail, etc), please talk to me before you act. A short call now can prevent a very expensive mistake later.

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