Can I liquidate my company and start again?

Starting a new business after company liquidation

When a company is liquidated, all its assets are sold and these funds are used to repay creditors as far as possible. After this, the company is removed from the official register held at Companies House and the company then ceases to exist legally. Any debts that remain at the end of an insolvent liquidation process are written off, unless these have been personally guaranteed by the directors. 

Although it’s against UK insolvency laws for directors to continue trading via a limited company once it becomes knowingly insolvent, once this company is liquidated, however, directors are more often than not able to start trading again with a new company.

Legislation recognises that companies fail for a variety of reasons and it’s not usually the directors fault. Sometimes market forces result in business failure, or other factors outside directors’ control. Due to this, there is no blanket ban on the directors of an insolvent company being able to set up a new business following the failure of a previous one.

Despite this, directors do need to consider the rules surrounding reuse of a company name when starting again following liquidation. Reusing your liquidated company’s name, or using one which is so similar that it could mislead others into thinking it was the same company, is forbidden for the five years following liquidation.

Starting a new company following liquidation

Insolvency laws state that directors involved in a company during the 12 months prior to its liquidation cannot for five years:

• Become director of a company with the same or a similar name
• Be involved in forming, promoting, or managing a company with the same or a similar name

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Reusing company names

If you start again with a new company you need to be very careful not to use the same or a similar company name. Section 216 of the Insolvency Act, 1986, lays down the rules surrounding the reuse of company names, but there are three exceptions to these rules:

1.     Purchasing business assets from the liquidator

When you purchase the whole of the business, or substantially the whole, you may be able to use the same or a similar name to the liquidated company. Where assets are purchased from the liquidator, you would need to inform creditors of your intention to run a new company with the same or similar name, and also publicly advertise the fact in the Gazette.

2.     Applying to court

You can apply to the court for permission to reuse the company name. This is called applying for court leave, and the application must be lodged with court no more than seven days following the liquidation of the old company. The court can grant ‘leave’ no more than six weeks from the application date. 

3.     Existing use of name

If the company was already known by this name during the 12 months before liquidation and it hasn’t been a dormant company during this 12 month period.

Considerations when liquidating a company and starting again

Although it’s possible to start again after liquidating your old company, there are several issues to consider. Apart from the restrictions on reusing company names you may need to provide a security deposit for HMRC when you start up, if the old company left behind unpaid tax debts.

There may also be problems in securing new lines of credit particularly from those creditors who lost money during the liquidation. It’s possible that these suppliers will only be willing to trade with the new company on a cash-on-delivery basis, for example, given the liquidation of the old company.

Buying the assets of your old company

When a company is liquidated, the directors sometimes purchase their business assets via the liquidator with a view to setting up a new company. It’s crucial to ensure you pay a fair price for the assets, and this can be done by obtaining an independent professional valuation.

When a new company emerges using the assets of a liquidated business it’s known as a ‘phoenix’ company, and HMRC may require additional safeguards if they’ve been unable to recover tax debts. One of these could be a down payment on tax called an HMRC security bond.

HMRC security deposit

If your old company had tax debts, HMRC may demand a security deposit when you set up a new company. This addresses their perceived risk of suffering further losses as a creditor of your new business. Security bonds or deposits can be requested for a variety of HMRC tax obligations including VAT, PAYE, and National Insurance.

Clearly, there’s much to consider when starting again after liquidating a company, but UK Liquidators are here to help. We’re liquidation specialists working from offices around the country, and can offer you a free same-day consultation. If you are considering liquidating your existing company and already have your eye on starting up again, we can help guide you through the process ensuring this is done in a way which is fully compliant with current insolvency legislation.