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COVID-19 – Keeping the name alive

COVID-19 – Keeping the name alive

In the circumstances of the pandemic, Directors of companies facing liquidation may have a perfectly good and profitable business which will not be able to cope with the loss of income caused by the lockdown.

In those circumstances, if they want to start again, they may want to keep the publicity and goodwill of the company name. However, section 216 of the Insolvency Act 1986 prevents directors of an insolvent liquidated company setting up a new company with the same or similar name to the old company under sanction of personal liability for the second company's debts and in some circumstances fine and imprisonment. The sensible reason behind this is to prevent Directors systematically setting up companies, transferring the assets to a new company and letting the old company die without thought of the creditors or customers of the first company.

Nevertheless, where there is a genuine reason for the failure of the company that is outside of the control of the Director, such as the pandemic, then the law may allow the Director to reuse the company name.

The earlier that steps are taken to deal with this position the better, and acting too late can remove the possibility.

For guidance on how to retain the use of your company name in the event of your company's liquidation then please contact:

Malcolm Thomas or Raman Dhillon

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