What Is a Prohibited Company Name Under Section 216 of the Insolvency Act?

When a company enters liquidation, directors often consider starting a new business. However, UK law places strict rules on what you can call that new company. One of the most important regulations to understand is Section 216 of the Insolvency Act 1986, which governs the use of “prohibited company names”. A prohibited company name is one that is the same as, or so similar as to suggest an association with, a company that has gone into insolvent liquidation. This applies to names used within the five years following the liquidation. The purpose of this rule is to prevent directors from misleading customers, suppliers, and creditors by creating a new business that appears to be a continuation of the old one. This is often referred to as “phoenixing”, and while starting again is legal, doing so under a confusingly similar name is tightly controlled.

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