Section 216 of the Insolvency Act 1986 stops a director of a liquidated company from reusing that company's name, or anything similar, in a new business for five years — unless one of three narrow legal exceptions applies. This is often called the "reuse of company name" or "prohibited name" rule, and it catches out more directors than you'd expect, because it isn't only about copying the name letter for letter.
If you're thinking about starting again after a liquidation and want to keep some brand recognition, it's worth understanding exactly what section 216 reuse of company name restrictions cover before you register anything with Companies House.
Why reusing a company name is restricted after liquidation
Parliament introduced section 216 to stop what's known as "phoenixism" — closing an indebted company through liquidation, then immediately opening a near-identical business under the same or a similar name, leaving creditors unpaid and confused about who they're now dealing with.
The rule exists to protect creditors and the public from being misled, not to punish directors who acted honestly. Genuine phoenix company rules allow a business to continue trading under new ownership in the right circumstances — the restriction targets the name, not the act of starting again.
What Section 216 of the Insolvency Act 1986 actually says
Section 216 applies to anyone who was a director, or shadow director, of a company at any time in the 12 months before it went into insolvent liquidation. For five years from the liquidation date, that person cannot, without leave of the court or a valid exception:
- be a director of a company known by a "prohibited name"
- be involved, directly or indirectly, in forming, promoting or managing such a company
- be involved in the management of any business that trades under a prohibited name
This means the restriction reaches beyond formal directorships. Acting as a consultant, shadow director, or the person actually running the business day to day can still breach section 216 if the prohibited name is used.
What counts as a 'prohibited name' (including similar names)
A "prohibited name" is one that was the liquidated company's registered name, or a trading name it used, in the 12 months before liquidation — or a name so similar that it suggests an association with that company.
"Similar" is judged on how the name would strike a reasonable member of the public, not on whether the wording is technically different. Examples that commonly fall foul of the rule include:
- dropping or changing "Limited" or "Ltd" only
- swapping a minor word (for example, "Northern Building Supplies Ltd" to "Northern Building Services Ltd")
- keeping the same trading style, logo wording, or domain name while changing the registered name slightly
Trading names and shortened "brand" names are covered just as much as the registered company name — this is one of the most common misunderstandings directors have.
The five-year restriction period
The restriction runs for five years starting from the date the company entered insolvent liquidation, not from the date of your appointment or resignation as director. There's no early release simply because the liquidation has closed or the company has been dissolved.
During those five years, using a prohibited name without an exception or the court's permission is both a criminal offence and a route to personal liability, covered below.
The three legal exceptions and how to use them
Section 216 and the accompanying Insolvency Rules set out three recognised ways to use a prohibited name lawfully. Each has strict conditions.
1. Court permission (leave of the court)
A director can apply to the court for permission to act, despite the prohibited name. In practice, this usually needs to be done within seven business days of the liquidation starting, and the court will look at whether creditors are likely to be misled or prejudiced.
2. Buying the business from an insolvency practitioner
If you buy the insolvent company's business or assets from the liquidator or administrator — a common route when buying assets from your own liquidation — you can use the prohibited name, provided you give notice to all known creditors of the liquidated company within 28 days of the purchase, or of first using the name if later.
3. The company was already known by the name
This exception applies if the new company has been known by the name for the whole of the 12 months before the old company went into liquidation, and it wasn't dormant during that period. It's designed for genuinely separate, long-standing businesses that happen to share a name, not for names created around the time of the liquidation.
Miss the notice period or the deadline on any of these routes and the exception simply doesn't apply — there's no informal leeway.
Penalties under Section 217: personal liability and prosecution
Section 217 of the Insolvency Act 1986 sets out what happens if section 216 is breached. A director who uses a prohibited name unlawfully becomes personally liable for the debts of the new business incurred while they were involved in its management.
That personal liability also extends to anyone else who was involved in managing the business and acted on the director's instructions, knowing the name was prohibited — it isn't limited to the director alone.
Separately, using a prohibited name without an exception is a criminal offence under section 216(4), carrying a potential fine, imprisonment, or both. Breaches can also feed into director disqualification proceedings.
How to keep your brand legitimately
If you value your brand and reputation and want to carry something forward after a liquidation, a few practical steps reduce the risk of a section 216 problem:
- Get advice from a regulated insolvency practitioner or solicitor before you register a new company name.
- Consider whether one of the three exceptions genuinely applies to your situation, and act within the strict time limits if so.
- If in doubt, choose a name that's clearly distinct — not a close variant — and build new goodwill rather than relying on the old name.
- Keep records of any court application, creditor notice, or evidence supporting an exception, in case it's ever questioned.
Our guide on starting again after liquidation covers the wider picture of rebuilding a business the right way once the reuse-of-name question is settled.
Frequently asked questions
Can I use a similar name to my liquidated company?
Only if it wouldn't suggest an association with the old company to a reasonable observer, or if one of the three legal exceptions applies. A name that's merely a minor variation is usually treated as prohibited.
What about the trading name, not the registered company name?
Trading names are covered too. Section 216 looks at any name the business was known by, including shortened brand names, not just the name on the Companies House register.
Does the five-year restriction start when I resign as director?
No. It runs from the date the company went into insolvent liquidation, regardless of when you resigned or were appointed.
What happens if I breach Section 216 without realising?
Personal liability under section 217 doesn't depend on intent — it can apply even to an honest mistake. It's a criminal offence too, so it's worth checking your position with a regulated specialist before trading under a similar name.
Can the court give me permission to reuse the name?
Yes, by making an application for leave of the court, typically within seven business days of the liquidation starting. The court considers whether creditors would be misled or prejudiced.
This article is general information, not legal, financial or insolvency advice, and every situation is different. If you're weighing up a new company name after liquidation, speak to a regulated specialist about your circumstances.
Harbourfirst can introduce you to a regulated insolvency practitioner or solicitor to talk through your options — start an enquiry.