Company liquidation

If you are a former director of a liquidated company, there are legal restrictions that apply regarding the reuse of that company's name or its trading name. This is intended to prevent abuse of the so-called 'phoenix company' - where a failed business re-emerges to operate under a similar name.

Prohibited names

A prohibited name is a name by which a liquidated company was known at any time in the 12 months immediately before its liquidation. This can be any of the following:

• the name registered at Companies House
• the company's trading name
• any name so similar to either of the above that it suggests an association with the liquidated company

The restrictions apply personally to you if you were registered as a director - or acted as a director - during the 12 months leading up to the liquidation.

What are the restrictions?

You - and any other former directors - are banned from being a director of a limited company that's using a prohibited name for five years from the date of the original company's liquidation. The ban includes not being allowed to take part in the formation, promotion or management of such a company.

The restrictions also extend to a business that is not a limited company - eg a partnership or sole trader - that's using a prohibited name. In such a case, any relevant former directors are banned from being concerned in or taking any part in carrying on such a business for five years.

Penalties for breaching rules on use of prohibited names

It is a criminal offence to break the rules regarding the use of a prohibited name. Successful prosecution could lead to a fine, a prison sentence or both.

You could also be made personally liable for company debts incurred during the period you were involved in managing a business using a prohibited name - even if it was a limited company.

If you are involved in managing a business and act on instructions from someone you know to be acting as a director when restricted from doing so you would be committing a criminal offence.

Exceptions to the rules - when you can reuse a prohibited name

There are certain exceptions where you can legally reuse a prohibited name. It will generally depend on the particular circumstances of an insolvency.

However, the penalties for breaking the rules are severe and it is highly recommended that you get professional advice on your options.