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Director fined, given community service and then ordered to pay a confiscation order of £100,000 plus costs.

ThorntonRones advises directors on how to avoid this exposure – to date, directors who have acted upon our advice have never been pursued.
It is a criminal offence to continue trading using the name of a company which has gone into insolvent liquidation (a prohibited name) – Section 216 of the Insolvency Act 1986 – and applies to anyone who was a director or shadow director of the company any time in the preceding 12 months for a period of 5 years following the liquidation.

What is often missed is that it applies to the use of not only a registered name, but also any trading name, and even if the future trading is not through an incorporated entity i.e. in partnership or as a sole trader!
It is a criminal offence - successful prosecution could lead to a fine, a prison sentence or both.
Recent Case:  In Neuberg, R. v [2016] EWCA Crim 1927 (15 December 2016), the Court of Appeal has just ruled that a confiscation order can be enforced against individuals who illegally trade under a prohibited name - in this case, the defendant was given community service, and ordered to pay a confiscation order of £100,000 plus costs.

The court concluded that: 
  • a confiscation order can be made against an individual who is convicted for trading under a prohibited name/style; and
  • the court is entitled to hold that the total turnover (not just the net profit) for the entire period of trading under that name is recoverable.
There are 5 principal ways to avoid or mitigate liability:
  • A Court application can be made for permission to act for a company (or unincorporated business) with a prohibited name.  
  • There is also a mechanism for giving notice in the immediate aftermath of liquidation by giving notice PROVIDED notice in proper form is given BEFORE there is an infringement of Section 216.
  • There is no infringement of Sections 216 and 217 if the second company has been known by the prohibited name for the whole of the 12 months preceding the day on which the first company went into liquidation and has been active for that same period.
  • Resigning as a director or manager.
  • Change the company or trading name.
Act in haste, repent at leisure? 
Trading under a prohibited name carries both civil and criminal penalties but is easily avoided – it is of utmost importance that proper advice is sought and taken following an insolvent liquidation and it is observed for the following 5 years.
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D. Flood, Rowland Hall Chartered Certified Accountants
ThorntonRones – we put the solve into insolvency

ThorntonRones is a specialist insolvency practice experienced in advising on both corporate and personal scenarios.  The principal of ThorntonRones, Richard Rones, is a Licensed Insolvency Practitioner, a Fellow of R3 and a Fellow of the ICAEW. 

Richard has extensive experience in the SME market that includes trading as ThorntonRones Insolvency Practitioners since 1999. He and his staff fully understand the difficult pressures faced by anyone running their own business and relish the opportunity to be of assistance.

We look forward to taking care of you.
Copyright © 2017 ThorntonRones Ltd, All rights reserved.

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