The rule stipulates that directors wishing to start up another company must wait at least five years. Section 2853 insolvency act 1986 prevents proceedings against a bankrupt from the making of a bankruptcy order until the bankrupts discharge except with the leave of the court. Section 216 reusing a company name after liquidation. Company and gone into insolvent liquidation are defined in s. The assets and property of the company are redistributed. This practice note considers sections 216 and 217 of the insolvency act 1986 that concern the prohibition on the use of certain names of companies that entered into an insolvency process. Provisions of the insolvency act 1986 as amended applicable.
Sections 216 and 217 of the insolvency act 1986 go further than preventing phoenixing as they catch any person who merely reuses the name of oldco, following oldco entering insolvent liquidation. In some circumstances it may appear ideal for the directors. View on westlaw or start a free trial today, insolvency act 1986, primarysources. Investigation of insolvency professional agency or its member or information utility.
Prohibited names under section 216 of the insolvency act 1986. Prohibited names insolvency trading issues restructuring. A copy of sections 216 and 217 of the insolvency act 1986 is attached together with a copy of rules. Rights and obligations of persons submitting financial information. This leaflet explains what reuse of a prohibited name means. Prohibited names under section 216 of the insolvency act 1986 practice notes. The provisions of the insolvency act 1986, sections 216 and 217 were introduced to tackle phoenix syndrome the restrictions apply to anyone who has been a director of a company at. Jan 24, 2017 a trustee in bankruptcy is granted a wide statutory power under section 366 of the insolvency act 1986 the act to ask the court, at any time after the bankruptcy order has been made, to. Personal liability for debts, following contravention of s 216.
A personal liability under section 217 of the ia 1986 for all debts incurred during. Complaints against insolvency professional agency or its member or information utility. The notice may name a person to whom section 216 may apply as having been a director or shadow director of the. Application of act part ii bankruptcy and alternatives. This practice note considers sections 216 and 217 of the insolvency act 1986 that concern the prohibition on the use of certain names of companies that entered. Section 216 of the insolvency act 1986 makes it illegal for any person who was a director of a company at any point in the 12 months before that company went into liquidation to be involved in another company with the same or a similar name for a period of five years. Reuse of a company name insolvency practitioners direct. As a result of that rejection, joe being positively bound to take some form of other insolvency action in respect of the company he owned, further discussed the matter with his insolvency advisor fred and decided that he had little alternative but to resort to a plan b. Section 216 of the insolvency act 1986 phoenix company. Requests for information from the trustee in bankruptcy under. Section 217 of the insolvency act 1986 provides three exceptions to s216.
This appeal turns on the construction and application of sections 216 and 217 of the insolvency act 1986 the 1986 act. Liquidation is also sometimes referred to as windingup or dissolution, although dissolution technically refers to the last stage of liquidation. The sections affect the directors of a company, which has gone into insolvent liquidation. Insolvency statute of 5 october 1994 federal law gazette i page 2866, as last amended by article 19 of the act of 20 december 2011 federal law gazette i page 2854 table of contents. The rule stipulates that directors wishing to start up another company must wait at least five years before. Section 216 offence under the insolvency act 1986 section 216 of the ia 1986 is designed to protect the public from being misled into dealing with a new. His claim against d was brought pursuant to sections 238 and 241 insolvency act 1986. Section 216 of the insolvency act 1986 does not immediately impact companies in administration since the legislation refers specifically to the restrictions on using a company name again the following the liquidation of a limited company. Breach team deal with breaches of section 216 of the insolvency act 1986 that are reported. Section 216 of the insolvency act 1986 makes it illegal for any person who. Insolvency act 2009 act 32009 proclaimed by proclamation no. Those considering the main act should also refer to the insolvency rules 1986 and numerous regulations and other amending legislation since 1986, and also to the best practice which applies to the administration of formal insolvency matters set out in the statements of insolvency practice sips approved by the insolvency practitioner. Prohibited namesoverview lexispsl, practical guidance for. Chapter 15 insolvency rule, regulations and orders.
Section 216 offence under the insolvency act 1986 section 216 of the ia 1986 is designed to protect the public from being misled into dealing with a new business, thinking that it is still the liquidated company. Section 216 of the insolvency act 1986 restriction on re. Additionally, section 217 of the act states that those found in breach of 216. The relevant debts are those debts which were incurred whilst that person was acting in contravention of section 216 or taking instructions from a person he knew to be in contravention of section 216. A trustee in bankruptcy is granted a wide statutory power under section 366 of the insolvency act 1986 the act to ask the court, at any time. Creditors of the parent company are safeguarded by the insolvency act 1986. Insolvency act 1986 financial definition of insolvency act 1986. Under section 217 of the act, a person who infringes section 216 becomes personally liable for the relevant debts of the new company. Requests for information from the trustee in bankruptcy. Under section 217 of the act, a person who infringes section 216 becomes personally liable for the relevant debts of the new. Directors who reuse a company name on insolvency, risk falling foul of section 216, one of the most draconian sections of the insolvency act 1986. These laws also apply to shadow directors those acting in the role of. Use one of the exceptions to section 216 insolvency act 1986 if your company has gone into liquidation it is possible to reuse what is otherwise a prohibited name if your successor companys name falls within or is made to fall within one of the three exceptions to sections 216 and 217 of the insolvency act 1986. This restriction applies personally to a director of the company in insolvent liquidation.
Where the company in liquidation is sold by the liquidator. What is the impact of section 216 in an administration. Provisions of the insolvency act 1986 as amended applicable under devolved scottish law. Insolvency act 1986 financial definition of insolvency act. Your attention is also drawn to section 217 of the insolvency act 1986, which provides, amongst other things, that a person who is involved in the management of a company in contravention of section 216 of the insolvency act 1986 is. An act to consolidate the enactments relating to company insolvency and winding up including the winding up of companies that are not insolvent, and of. Procedure where nominee is not the liquidator or administrator. Prohibited names under section 216 of the insolvency act. The insolvency service considers that notice cannot be given under this rule prior to liquidation unless. This practice note looks at wrongful tradingalso known as trading whilst insolventclaims under. His claim against d was brought pursuant to sections 238 and 241 insolvency act. The applicants are concerned that section 216 of the insolvency act 1986 the. The provisions of sections 216, 217 and 235 of the insolvency act 1986 and rules 22. Liquidation is the process in accounting by which a company is brought to an end in the united kingdom, australia, new zealand, republic of ireland, cyprus, united states and italy.
Paper, the insolvency act 1986 included in section 216 what is commonly referred to as phoenix. The risks and opportunities of reusing a company name. Phoenix trading and liability of directors uk parliament. There are, however, certain circumstances in which a prohibited name can be used. Sale of a business if the new venture purchases the whole or substantially the whole of the business of the insolvent company from its liquidator, then a similar name may be used. Section 216 of the insolvency act 1986 prevents a director from becoming a director of a new company which is known by a prohibited name. Nov 15, 20 a transaction under section 238 of the insolvency act 1986.
The relevant sections of the insolvency act 1986 are as follows. Section 216 reusing a company name after liquidation aabrs. An act to consolidate the enactments relating to company insolvency and winding up including the winding up of companies that are not insolvent, and of unregistered companies. Wrongful trading claims under sections 214 and 246zb of. Chapter 2 voluntary winding up introductory and general. The notice may name a person to whom section 216 may apply as having been a. Creditors of a liquidated company are not bound by a section 110 reorganisation.
A breach of this section is a criminal offence and results in the director or a shadow director, and anyone who assists him knowing he is in breach, being liable for the new companys debts. Nov 11, 2014 directors who reuse a company name on insolvency, risk falling foul of section 216, one of the most draconian sections of the insolvency act 1986. Section 216 and the prohibitions on the reuse of a company name after liquidation. Insolvency act 1986 section 216 restriction on reuse of company names 1 this section applies to a person where a company the liquidating company has gone into insolvent liquidation on or after the appointed day and he was a director or shadow. Section 216 of the insolvency act 1986 places certain restrictions on a person who was a director or shadow director of a company the liquidating company at any time in the period of 12 months prior to that companys insolvent liquidation the 12 month period.
Most of the issues set out above apply equally in relation to individual insolvency. Wrongful trading claims under sections 214 and 246zb of the. Reusing a company name after liquidation the gazette. Failure to comply renders the persons conce rned liable to prosecution and personal liability for the debts of the company under section 217. Insolvency act 1986 use of prohibited names designing. The name which cant be used is known as the prohibited name. Pdf documents and check that download pdf files instead of automatically. The insolvency act 1986 followed the publication and most of the findings in the cork report, including the introduction of the individual voluntary arrangement iva and company voluntary arrangement cva procedures elements of the act have been updated by the enterprise act 2002 which came into enforcement on 1 april 2004 and introduced amongst other things the popular outof.
Section 216 of the insolvency act 1986 phoenix company reuse of prohibited name phoenix company insolvency law where a phoenix company is set up following the liquidation of the original company, there are strict legal rules concerning the reuse of the liquidated companys name which is classed in law as a prohibited name. What is the impact of section 216 on an administration. Insolvency act 1986 a uk act that sets out the procedures for dealing with insolvent companies see insolvency. A copy of sections 216 and 217 of the insolvency act 1986 is attached together with a copy of rules 4. The prohibited names provisions under insolvency act 1986, s 216. Insolvency act 1986 section 216 restriction on reuse of. Contravention of section 216 of the insolvency act 1986 is a criminal offence. Section 1 objectives of the insolvency proceedings. A transaction under section 238 of the insolvency act 1986. Wrongful trading claims under sections 214 and 246zb of the insolvency act 1986 practice notes. Tax issues section 110 reorganisations are fraught with tax issues. This document shows how the insolvency act 1986 will apply to cios. This practice note looks at wrongful tradingalso known as trading whilst insolventclaims under sections 214 and 246zb of the insolvency act 1986.