Directors often ask if they are allowed to start another company having previously had a business which entered into liquidation, or another insolvency procedure. This article explores the options and potential pitfalls in such a situation.
In general terms there is nothing to stop a director from becoming, or continuing to be, a director of another limited company following the liquidation of a previous business. In fact there is no upper limit on the number of simultaneous directorships an individual can hold, irrespective of any previous insolvencies, although a director should always be mindful of the requirement to fulfil their fiduciary duties in each case.
It should also be noted that where a director has been involved in an insolvency procedure then this may have an impact on the credit profile of other companies for which they act as a director. This is because banks and other credit institutions will usually monitor Companies House records and may form the view that a history of previous insolvencies means that other businesses this director is involved in are more likely to fail in the future.
Re-use of a Company Name
In certain circumstances it is possible for a director to start a new company and use the same trading name. However it is vital that this is done in accordance with insolvency legislation as strict rules apply in these circumstances. If these aren’t followed and the new company also fails, then the director could find themselves being made personally liable for any debts in the new company. This is a very important area and we have written a specific article which you can read about here.
Director Disqualification
One of the main reasons why a director will not be able to start a new company after liquidation is where they have been subject to a Director Disqualification. This happens in circumstances where the Insolvency Service have adjudged that a director has been in serious breach of their fiduciary duties, and disqualification can last for up to 12 years. You can learn more about this by reading our article here Grounds for Director Disqualification.
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