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Section 216 Insolvency Act 1986

(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 director of the company at any time in the period of 12 months ending with the day before it went into liquidation.

(2) For the purposes of this section, a name is a prohibited name in relation to such a person if –

(a) it is a name by which the liquidating company was known at any time in that period of 12 months, or

(b) it is a name which is so similar to a name falling within paragraph (a) as to suggest an association with that company

(3) Except with leave of the court, or in such circumstances as may be prescribed, a person to whom this section applies shall not at any time in the period of 5 years beginning with the day on which the liquidating company went into liquidation –

(a) be a director of any other company that is known by a prohibited name; or

(b) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company; or

(c) in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on (otherwise than by a company) under a prohibited name.

(4) If a person acts in contravention of this section, he is liable to imprisonment or a fine, or both.

(5) In subsection (3), “the court” means any court having jurisdiction to wind up companies; and, on an application for leave under the subsection, the Secretary of State or the Official Receiver may appear and call the attention of the court to any matters which seem to him to be relevant.

(6) References in this section, in relation to any time, to a name by which a company is known are to the name of the company at that time or to any name under which the company carries on business at that time.

(7) For the purposes of this section, a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.

(8) In this section, “company” includes a company which may be wound up under Part V of this Act.

SECTION 217 INSOLVENCY ACT 1986

(1) A person is personally responsible for all the relevant debts of a company if at any time –

(a) in contravention of Section 216, he is involved in the management of the company; or

(b) as a person who is involved in the management of the company, he acts or is willing to act on instructions given (without the leave of the court) by a person whom he knows at that time to be in contravention in relation to the company of Section 216

(2) Where a person is personally responsible under this section for the relevant debts of a company, he is jointly and severally liable in respect of those debts with the company and any other person who, whether under this section or otherwise, is so liable

(3) For the purposes of this section, the relevant debts of a company are –

(a) in relation to a person who is personally responsible under paragraph (a) of subsection (1), such debts and other liabilities of the company as are incurred at a time when that person was involved in the management of the company, and

(b) in relation to a person who is personally responsible under paragraph (b) of that subsection, such debts and other liabilities of the company as are incurred at a time when that person was acting or was willing to act on instructions given as mentioned in that paragraph

(4) For the purposes of this section, a person is involved in the management of a company if he is a director of the company or if he is concerned, whether directly or indirectly, or takes part, in the management of the company

(5) For the purposes of this section, a person who, as a person involved in the management of a company, has at any time acted on instructions given (without the leave of the court) by a person whom he knew at that time to be in contravention in relation to the company of Section 216 is presumed, unless the contrary is shown, to have been willing at any time thereafter to act on any instructions given by that person

(6) In this section, “company” includes a company which may be wound up under part V

Part 22 of the Insolvency Rules 2016

LEAVE TO ACT AS DIRECTOR, ETC OF COMPANY WITH PROHIBITED NAME (SECTION 216 OF THE ACT)

Rule 22.1 – Preliminary

The Rules in this Part –

(a) relate to permission required under Section 216 (restriction on re-use of name of company in insolvent liquidation) for a person to act as mentioned in Section 216(3) in relation to a company with a prohibited name;
(b) prescribe the cases excepted from that provision, that is to say, those in which a person to whom the section applies may so act without that permission; and
(c) apply to all windings up to which Section 216 applies.

Rule 22.2 – Application for permission under s 216(3)

(1) At least 14 days notice of any application for permission to act in any of the circumstances which would otherwise be prohibited by section 216(3) must be given by the applicant to the Secretary of State, who may –

(a) appear at the hearing of the application; and
(b) whether or not appearing at the hearing, make representations.

Rule 22.3 – Power of court to call for liquidator’s report

When considering an application for permission under section 216, the court may call on the liquidator or any former liquidator, of the liquidating company for a report of the circumstances in which the company became insolvent and the extent (if any) of the applicant’s apparent responsibility for its doing so.

Rule 22.4 – First excepted case

(1)

(a) a person (“the person”) was within the period mentioned in section 216(1) a director, or shadow director, of an insolvent company that has gone into insolvent liquidation; and

(b) the person acts in all or any of the ways specified in section 216(3) in connection with, or for the purposes of, the carrying on (or proposed carrying on) of the whole or substantially the whole of the business of the insolvent company where that business (or substantially the whole of it) is (or is to be) acquired from the insolvent company under arrangements –
( i) made by its liquidator; or
(ii) made before the insolvent company entered into insolvent liquidation by an office-holder acting in relation to it as administrator, administrative receiver or supervisor of a CVA.

(2) The person, will not be taken to have contravened section 216 of prior to that person acting in the circumstances set out in paragraph (1) a notice is, in accordance with the requirements of paragraph (3), -

(a) given by the person, to every creditor of the insolvent company whose name and address –
( i) is known by that person; or
(ii) is ascertainable by that person on the making of such enquiries as are reasonable in the circumstances; and
(b) published in the Gazette.

(3) The notice referred to in paragraph (2) must comply with the rules which are not replicated here.

Rule 22.6 – Second excepted cases

(1) Where a person to whom Section 216 applies as having been a director or shadow director of the liquidating company applies for permission of the court under that section not later than seven business days from the date on which the company went into liquidation, the person may, during the period specified in paragraph (2) below, act in any of the ways mentioned in section 216(3), notwithstanding that the person does not have the leave of the court under that section

(2) The period referred to in paragraph (1) begins with the day on which the company goes into liquidation and ends either on the day falling six weeks after that date or on the day on which the court disposes of the application for permission under Section 216, whichever of those days occur first

Rule 22.7 – Third excepted case

The court’s leave under Section 216(3) is not required where the company there referred to, though known by a prohibited name within the meaning of the section –

(a) has been known by that name for the whole period of 12 months ending with the day before the liquidating company went into liquidation; and

(b) has not at any time in those 12 months been dormant within the meaning of Section 1169(1),(2) and (3)(a) of the Companies Act 2006.