Directors Beware: Avoid Falling Foul of Rules Against Re-using a Company Name
If you were a director of a company which went into liquidation and currently run a new company which uses the assets and a name similar to the previous company, you may be committing a criminal offence and be leaving yourself personally liable for thousands of pounds. Many directors caught by this could easily avoid the risks.
There are laws under section 216 of the Insolvency Act 1986 aimed at protecting the public from the risks associated with dealing with directors who trade under a company name similar to that of a now insolvent company previously directed by them. Directors in breach could also be personally liable for any of the debts amassed by the new company and be found guilty of committing a criminal offence.
Last year, Robert Porter, aged 67 was sentenced to 6 months in prison and disqualified from being a director for over 3 years. Mr Porter’s wife was also sentenced to 150 hours unpaid community service.
Both were investigated by the Insolvency Service and prosecuted by the Department for Business Innovation and Skills for using the trading style of A & B Construction for their new company (Porter & Co) where the former company had gone into insolvent liquidation less than 12 months before.
DCIO Liam Mannall, from the Department for Business Innovation and Skills said this demonstrates that they will investigate and prosecute those who ignore the restrictions placed on them.
Andrew Garland comments that in line with established case law ‘as long as there exists a real possibility of association between the new company and the insolvent company, then directors may be at risk of huge debts, fines, imprisonment or all of the above. It is disappointing that time and time again directors are usually unknowingly committing these offences, when such risks can easily be avoided by proper legal advice.’
If you are a director of a company that has recently gone into liquidation and want to carry on trading under a new business and do not want to fall foul of the law then please call the Director Defence team on 0121 710 5818 or email [email protected]