Can I be a director again after my business folds?

Starting a new company as a director after company liquidation

If your company has had to enter liquidation due to severe financial difficulties, you may be wondering where you stand as a director and what the future may hold for you, particularly when it comes to running a business again.

Generally speaking, you can be a director again even if you have had a company which has been liquidated, however, directors will face certain restrictions when it comes to reusing the name of a liquidated company; these rules are in place to protect creditors and other stakeholders.

Following an insolvent liquidation process the actions of directors during the period leading up to the company becoming insolvent are investigated. While the vast majority of these investigations find no wrongdoing on the part of the directors, if any form of misconduct or wrongful trading is uncovered, this could affect your ability to be the director of another company. This is because, under the Company Director Disqualification Act (CDDA), you could potentially be disqualified from acting as a director for up to 15 years.

There are three tiers of director disqualification:

• 2-5 years, typically as a result of negligent conduct
• 6-10 years, usually for more serious misconduct
• 11-15 years, typically reserved for fraudulent activity 

Starting again after your business folds

There are certain restrictions on starting again as director of a company after a business folds, and one of these is the reuse of the liquidated company’s name. Under Section 216 of the Insolvency Act, 1986, you cannot use the same or a similar name of the company which has been liquidated unless you have express permission from the court.

These restrictions are in place to prevent directors from deliberately running up company debts, and then moving on to a succession of other companies all trading under the same name, potentially causing confusion to creditors who are unaware of the previous liquidations. 

Under certain circumstances this rule doesn’t apply, however. You may be able to use the same, or similar, name for your new company, if:

• You purchase all, or a substantial proportion, of the company that’s been liquidated. You must also ensure that all stakeholders are informed of your intention to use a similar name.
• You’re granted permission from the court to use a similar name
• If your new company has been trading using the name as the liquidated company for the whole of the 12 months prior to the date of liquidation

So how does liquidation take place if your business folds?

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Seeking professional insolvency advice if you’re worried that your business will fold

It’s possible to be a director again after your business folds, but this requires careful consideration to ensure you don’t breach the laws in this respect, as they’re stringently applied by the Insolvency Service.

If you’d like more information on company liquidation, and the potential ramifications for yourself as a director, please get in touch with UK Liquidators. We’re liquidation specialists and can provide the advice you need during times of financial crisis.

We’ll ensure you adhere to all the relevant rules and restrictions, whilst also explaining your options for the future. We can offer you a free, same-day consultation with one of our experienced partner-led team, operating in our offices around the country.