Clients often ask whether they can reuse a limited company name after liquidation. In short, no. But there are some exceptions.
When a company faces liquidation, many business owners consider setting up a new company to continue trading. However, strict laws exist in the UK regarding the use of the same or similar company names after insolvency. Failure to comply with these regulations can lead to serious legal consequences. At Aurora Recovery, we help business owners navigate these complexities, ensuring compliance and avoiding potential pitfalls.
What Does the Law Say?
The Insolvency Act 1986 (Section 216) states that if a company enters liquidation, its directors cannot be involved with a new or existing business using the same or a similar name as the liquidated company for five years—unless they meet specific legal exceptions. This rule aims to prevent directors from avoiding debts and liabilities while misleading customers, creditors, and suppliers into thinking the new business is the same as the previous one.
Why Is This Law in Place?
This restriction is designed to:
✔ Protect Creditors – Preventing directors from using a new company to escape financial responsibilities while continuing the same business.
✔ Prevent Misrepresentation – Avoiding confusion where customers or suppliers believe they are dealing with the original company.
✔ Ensure Fair Business Practices – Discouraging directors from abusing the insolvency process to gain an unfair advantage.
Potential Confusion for Business Owners
Many directors mistakenly assume they can close a company and restart under the same or a slightly altered name without issue. This misunderstanding can lead to:
❌ Legal Penalties – Breaching Section 216 can result in fines, personal liability for company debts, or even a prison sentence.
❌ Reputational Damage – Creditors and suppliers may refuse to work with a company perceived as engaging in “phoenixing” (restarting under a new name to avoid liabilities).
❌ Operational Disruptions – If the new company is forced to change its name post-launch, it may lead to branding issues and loss of customer trust.
Are There Legal Ways Around This Issue?
While the rules are strict, there are exceptions that allow directors to reuse a company name under specific circumstances:
1. Court Permission (Leave of the Court)
Directors can apply to the court for permission to use the restricted name. However, this must be done within seven days of the liquidation and requires clear justification.
2. Acquisition from an Insolvency Practitioner
If the new company purchases the assets of the old company from an insolvency practitioner, it may be allowed to use the same or similar name—but strict notification rules apply.
3. Pre-Existing Business Exception
If the director was already trading under the restricted name for at least 12 months before the liquidation, they may be exempt from the rule.
How Aurora Recovery Can Help
Understanding whether you can reuse a limited company name after liquidation can be complex. At Aurora Recovery, we provide expert guidance on:
✔ Ensuring Compliance – Helping you navigate Section 216 restrictions to avoid penalties.
✔ Alternative Business Solutions – Advising on legally compliant ways to continue operations.
✔ Insolvency Guidance – Offering expert support throughout the liquidation process to protect your interests.
✔ Court Application Assistance – Assisting with applications for court permission to reuse a company name where applicable.
Need Advice? Contact Us Today
If you’re considering setting up a new business following liquidation and want to ensure full legal compliance, speak to Aurora Recovery today.
📞 Call us: 01134 800 397
📧 Email us: hello@aurorarecovery.co.uk
🌐 Visit our website: https://aurorarecovery.co.uk
We’re here to help you make informed, legal, and strategic decisions for a fresh start.
Contact us now to see how we can help you: https://aurorarecovery.co.uk/contact/
Read more about the restrictions around whether you can reuse a limited company name after liquidation on the government’s website here: https://www.gov.uk/guidance/director-information-hub-restrictions-on-reusing-an-insolvent-company-name
