If you were a director at a company that was liquidated, you can assume that role in another company  if certain conditions are met.

If you’ve faced the process of a company liquidation, you may think you cannot regain your company director role. But in fact, you easily can.

You have the option to be a company director for a range of different businesses if there hasn’t been any form of misfeasance during any company liquidation process, allowing you to begin another when you think the time is right and you have researched the guidelines in place and spoken to real business experts, such as ourselves.

If you are looking to begin a new company director venture, it is vital that you follow these rules.

In this article, Rick Smith, Managing Director of Forbes Burton will go through the advice and support you need when looking to remain a company director, but also looking to restart your business venture.

Guidelines You Need To Follow After Company Liquidation

Firstly, you are not to use a business name that is similar to what was your previous company. The legal association with this rule, is that is could be seen as “passing off,” which under section 216 in the Insolvency Act (1986) means it can lead to a form of criminal action against the director, or even held liable of all debt of the new company, if it was to go into liquidation.

Although, it is possible to purchase the company name through administration, or the Insolvency practitioner can agree to sell the name, but for this process, you would need a court application to support this process.

Another area that you need to bear in mind is that any court application has to show why the rules of section 216 will not apply. Also, if you are considering purchasing the business, it will be available at a high cost and will have to be vaulted by an independent valuer.

What Is Section 216?

As we have touched on, Section 216 is part of the Insolvency Act (1986.)

Breaking the rule of Section 216 is an illegal offense and is caused by company directors or shadow directors creating a new company 12 months prior to their liquidation and giving it the same or similar name for a period of 5 years.

Does Section 216 Relate To My Situation?

If you are in a similar situation, a simple way to find out if you are involved in this, is to ask yourself this question:

“Have I been in the liquidation process as a company director?”

If the answer to this question is yes, then it is highly likely that it may apply to you, but you should always talk to specialists beforehand for the correct analysis.

Section 216 means you cannot direct, form, manage or even promote a company with the same or similar name to the one you previously liquidated.

Many people may think breaking the rules of Section 216 is not serious, but is in fact, a criminal offence.

Company directors who fail to comply with the guidelines can be faced from a fine, all the way to a term in prison, or even both.

Does Section 216 Have Any Exceptions?

There are only a few exceptions with Section 216:

  • If you have been granted permission by court, your application for permission has to have been made within seven days of the company liquidation process. This will provide you with automatic grant permissions, but this is temporary for six weeks.
Liquidation Rules, Industry Today
The rules governing which courts the application need to be made too, so you will need expert advice before taking this option.
  • The business or business assets of the company that was liquidated and sold to the new company by the liquidator requires a notice in a prescribed form to be sent to the creditors of the liquidated company and placed on The Gazette publication.
  • If you are involved with another business that has been using the same name as the one you liquidate for at least a year, you are able to be the director of that company.

If you have faced the process of company liquidation, then it is vital that you consider the guidelines and rules that are in place after the liquidation.

As a company director, you may be faced with certain restrictions, but there is no restriction on you building up your next business venture. But you need to ensure that you are ready for the process and you have a plan in place that can help ensure success.

Don’t allow company liquidation to stop you from building another successful business venture.

Rick Smith Forbes Burton, Industry Today
Rick Smith

Managing director as Forbes Burton, Rick Smith helps business owners that are facing financial difficulty with their business, alongside his team of business experts.

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