A director is prohibited from acting as a director of a company with a similar name or the same name as an insolvent company they previously acted for, five years after the insolvent entity entering liquidation. The consequences for a director who breaches section 216 of the Insolvency Act are both civil and criminal.
A director who is in breach of section 216 of the Act is automatically liable for the debt of the new company. In the recent case PSV 1982 Ltd v Langdon, a director unwittingly became personally liable for the debts of his new company, Discovery Yachts Sales Limited (DYSL).
A customer was sold a yacht by DYSL which was originally built by Discovery Yachts Limited (DYL). The vessel had various defects and DYSL agreed to repair the yacht.
DYSL did not repair the yacht and entered into liquidation. DYL also entered into liquidation in 2017 and had a common director with DYSL.
The customer obtained a judgement against DYSL and this was held to be enough to make the director personally liable for the debt.
The court had little sympathy for the director who was in breach of section 216 and was re-using a similar name.
If you have any clients who are looking to “start again” after their business has been placed into a formal insolvency process, this case acts as a stark reminder of the potential pitfalls.
For more information on bankruptcy, liquidation, administration and all the other insolvency procedures, or should you or your company be facing financial difficulties and you need to chat, please telephone Charlotte Hutchinson on 01377 257788 and she will make you an appointment with one of our insolvency professionals at our Driffield, Hull, Grimsby, Scunthorpe or York offices. Our initial meetings are free and without obligation. Meetings can be held virtually or in any of our offices whilst observing the socially distancing guidelines.
Because we are an independent insolvency practice, we keep our overheads low and have put systems in place to deal with simple liquidations at an affordable price of from £1,995 + VAT + Disbursements. Our MVLs are from £995 + VAT + Disbursements.