Can I be a director again after my business folds?

If your business has had to enter liquidation due to severe financial difficulties, you may be wondering where you stand as a director.

Generally speaking, you can be a director again after your business folds, but there are restrictions in place to protect creditors and other stakeholders. Additionally, following an insolvent liquidation process the actions of directors are investigated to establish whether they negatively affected the outcome.

If any form of misconduct or wrongdoing is uncovered, this could affect your ability to be the director of another company, or a shadow director. This is because, under the Company Director Disqualification Act (CDDA), potentially you could be disqualified from the office of 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, 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 use of the company’s name. Under Section 216 of the Insolvency Act, 1986, you cannot use the same or a similar name as the company that’s been liquidated.

These restrictions are in place to prevent unscrupulous directors from deliberately running up company debts, and then moving on to a succession of other companies. Under certain circumstances this rule doesn’t apply, however.

You may be able to use a similar name for your new company, if:

• You use purchase all, or a substantial proportion, of the company that’s folded. 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 the company that’s folded was known by the name you’d like to use, in the 12 months’ prior to liquidation, you may be able to carry on using it

So how does liquidation take place if your business folds?

Creditors’ Voluntary Liquidation (CVL)

If it’s not possible to rescue your business you’d need to enter Creditors’ Voluntary Liquidation, or CVL. This is a formal process overseen by a licensed insolvency practitioner (IP), who acts as liquidator.

One of the advantages of voluntarily entering liquidation is that you can make your own choice of liquidator, and can decide on the best time to commence the process. In brief, the liquidator sells all business assets with a view to repaying creditors from the proceeds, with any remaining debt being written off.

You may be able to negotiate with the liquidator to purchase some or all of the company’s assets to use again in a new company, although the liquidator would have these professionally valued first.

If you purchase a substantial part of the business, the liquidator may also sanction the adoption of a similar company name for your new business, as described earlier.

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 it also 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 reliable advice you need.

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 partner-led team, and work from offices around the country.