Q&A - Can I set up a new company with a similar name after liquidation?

Q:  I am a director of a company that is struggling financially. A creditors' meeting is due to take place next week to liquidate it. Could I set up a new company afterwards with a similar name?

A:  Under insolvency law, there are restrictions preventing former Director of a liquidated company from using a ‘prohibited name' for five years after liquidation. The term ‘prohibited name' encompasses not only the registered name but also any trading name of the former company or a name so similar that it may suggest a link with it. The restriction applies not only to the set up of a new company with a similar name but the set up of any business (i.e. working as a sole trader or in partnership).

There are however three exceptions:

1. Buying the company in liquidation - this applies where you have or intend to set up a business that buys the whole or a substantial part of the former company from the liquidator. A special form of notice must be given to all creditors and published in the London Gazette within 28 days of completion.

2. Immediate application to the Court for permission - this must be made within seven business days of the resolution to wind up. The type of application will vary depending upon whether the liquidation was voluntary or involuntary.

3. Previous use of the name by another company/business - this applies if another business you are involved in has traded continuously for twelve months up to the date of liquidation and used the prohibited name for the whole of that period.

Using a prohibited name outside the exception rules could result in you being found personally liable for the debts of the former company. You should seek the advice of a commercial solicitor who can advise you on the best course of action to take in your particular circumstances.

04/07/2011