If your company is liquidated it means that all its assets are sold to repay creditors, prior to the company closing down for good. The liquidator takes charge of the business on appointment, and ultimately investigates why the company failed.
The liquidation of one business doesn’t necessarily prevent you from starting a new company in the future, however. In many cases business failure is a result of elements outside the control of company directors, such as general market decline.
But if you do choose to start a new company, there are stringent rules on the reuse of a company’s name. So why might you want to reuse your old company name?
When you start a new company following liquidation, using the same name or one that sounds similar can help you get the business off the ground quickly as it’s already a recognised commercial entity.
You don’t have to spend time building a new brand and can use the goodwill of the old company to your benefit. There are potential drawbacks when you reuse a company name, however – the rules are very strict, and it’s important to be aware of the potential consequences of getting it wrong.
These include personal liability for any debts of your new company, financial penalties, and even imprisonment in the most serious cases.
The rules on reusing company names are laid out in Section 216 of the Insolvency Act, 1986. They’re in place to prevent dishonest directors deliberately trying to misrepresent themselves and a company, and mislead former creditors or the public at large.
Regulations prevent the reuse of the same or similar company name after that company has been liquidated, but there are three exceptions to these regulations.
The Insolvency Act prohibits the reuse of limited company names apart from in these three specific scenarios:
You obtain permission from the court
You can apply to court to reuse the name of your liquidated company, but you must do so within seven days of liquidation. This process is known as applying for ‘court leave’ – essentially, requesting official permission to use the same or a similar name.
You buy the business assets from the liquidator
If you purchase the whole or substantially whole business from the liquidator, you may be able to reuse the company’s name. An important part of this process, however, is to inform creditors of your liquidated company that you’ll be reusing the company name, and also place an advert to the same effect in the Gazette.
You use an existing name
If the company has used the name for at least 12 months before the liquidation took place, you may be able to continue to use the name as long as it wasn’t a dormant company during this time.
Reusing a company name outside of these three scenarios could have serious ramifications for you and other directors. Our experts at UK Liquidators can arrange a free consultation to establish whether you can legally reuse your company name – we operate an extensive network of offices throughout the country.
If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.
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One of the main benefits of trading as a limited company is that directors are given the protection afforded by limited liability.
A Members’ Voluntary Liquidation – or MVL – is a formal liquidation process designed as a way for solvent companies to wind down their operations.
A Creditors’ Voluntary Liquidation – or CVL – is a formal insolvency process for insolvent limited companies.
If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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