Enabling greater use of section 216 of the Insolvency Act 1986 (‘IA86’),

‘Restriction on re-use of company names’

Key points

• Sections 216 and 217  IA86 are aimed at preventing phoenix companies from causing damage by controlling the re-use of company names, and making the rogue director personally liable where the director of a company that goes into insolvent liquidation (company A) is involved in the management of a second company with a similar name (company B).

• Despite the repercussions for breaching the section being relatively severe for a director, de facto or shadow director, the legislation is not effective in practice as many creditors are unaware of this entitlement and few have sufficiently significant debts to make a claim economically viable on their own.

• To enable the legislation to be widely used in practice and function effectively as a powerful tool, we would propose some relatively minor changes to sections 216 and 217 IA86 and the introduction of a new section 217A. The proposed changes would extend the ambit of the provisions to insolvent dissolved companies and are likely to enable creditors the ability to benefit from claims under these sections more effectively.