Phoenix companies: prohibited names
When a limited liability company fails and a director of that business continues to trade under the same or a similar name after its failure, there is often disquiet. This is particularly the case where the director is thought to have acquired the assets of the company at a knock-down price from the liquidator of the old company, despite the company leaving a raft of unpaid creditors.
The law attempts to prevent this ‘phoenix phenomenon’ by proscribing the use of a ‘prohibited name’ except in certain circumstances, criminalising contravention of the rules and making anyone guilty of such contravention personally responsible for all debts of the new company.
The relevant provisions are contained in sections 216 and 217 of the Insolvency Act 1986…
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