Can I set up a new company using the same name as my liquidated company?
In Scotland, reusing a company name after liquidation is possible although it is heavily restricted by law. As a general rule, you cannot use the same or a similar name for a new company for five years after the liquidation of the original company except in certain situations. This applies to companies liquidated via either compulsory liquidation or voluntary liquidation via a Creditors’ Voluntary Liquidation (CVL) process.
This rule is outlined in Section 216 of the Insolvency Act 1986. Under this regulation there are restrictions on the director of a liquidated company using the same or a similar name for a new or existing company for the five years following its entry into liquidation. This is known as a “prohibited name.”
Can I set up a new company using the same name after liquidation?
While you will be permitted to set up a new limited company after liquidation, unless you have been subject to a disqualification order, you will be restricted as to what you can call the new company.
These rules are set out in the Insolvency Act 1986 and are in place to protect creditors and the general public from being misled and unwittingly dealing with a company which has recently undergone a liquidation process.
There are some exceptions, however, which could allow you to continue trading using the same – or a very similar name – to that of your liquidated company. The three exceptions that exist are:
- Obtaining permission of the court
You can apply to the court within seven days of the liquidation to request permission to use the name. The new company must not have started trading at this point. You will typically be given a six-week period where you can use the prohibited name while the court makes a decision.
- Evidence of prior trading
If the new company has been trading under the same name for at least 12 months before the liquidation of the insolvent company, it can continue using the name, provided it was actively trading during this time and not simply incorporated and then left dormant.
- Asset purchase from the liquidated company
You can purchase the assets (including the name) of the liquidated company from the appointed insolvency practitioner during the liquidation. If this is achieved, then you can reuse the name after you have notified creditors and published a notice in the Gazette.
What are the consequences for reusing a company name without permission?
It is important that you understand the legal implications for not adhering to the rules surrounding reuse of company names following liquidation. Potential consequences for falling foul of these rules are:
- Being held personally liable for the debts of the new company
- Criminal charges which could lead to fines or even imprisonment
- Disqualification from acting as a director for up to 15 years
How Scotland Liquidators can help
The rules surrounding reuse of company name after liquidation can be confusing. If you are considering liquidating an insolvent company and incorporating a new company to continue trading, you need to speak to a licensed insolvency practitioner about your plans.
They will be able to talk you through the various ways you have of achieving this while staying compliant of the Insolvency Act. Contact our team of licensed insolvency practitioners for immediate help and advice.
