Phoenix companies and reusing a business name
A phoenix company is a new company that rises from the ashes of one that has gone into insolvent liquidation, often run by the same director and continuing a similar business. Doing this is perfectly legal in principle: most directors can form a new company after a liquidation, and buying back the business or its assets from the liquidator at proper value is a legitimate way to save a viable trade and jobs. The strict rules are about the name. Under section 216 of the Insolvency Act 1986, for five years a former director generally cannot be involved in a new company that uses the same or a similar name to the liquidated one, unless one of three statutory exceptions applies, such as following the correct court or creditor notice procedure. Breaching the rule is a criminal offence and can bring personal liability. So a phoenix is fine when done properly and transparently, with assets bought at fair value and the name rules respected, but it needs to be handled with a Licensed Insolvency Practitioner. Insolvency Act 1986, s216
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- Is it legal?
- Yes, in principle; a new company after liquidation is allowed
- The name rule
- Section 216 restricts reusing the same or similar name for 5 years
- Exceptions
- Three statutory routes, including the correct notice procedure
- Breach
- A criminal offence with possible personal liability
Do it properly, especially the name
Buying the business back must be at fair value through the liquidation, and the section 216 name rules must be followed or a statutory exception used. A pre-pack administration is the regulated version of this. Always involve a practitioner.
Common questions
Can I use the same company name after liquidation?
Generally not for five years, unless you follow one of the three statutory exceptions under section 216, such as giving the correct notice. Breaching the rule is a criminal offence, so take advice first.
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