Using similar name to insolvent company

Using similar name to insolvent company

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Client trading as ltd co. got in debt asked his daughter to take over business. Daughter formed new company (daughter not my client).

Now creditor of old company demanding payment. has ccj for old company.

What are consequences for my client and/or his daughter and can anything be done at this stage (other than the obvious of paying the creditor or appointing a liquidator)

All filing up to-date with companies house. Could we ask for removal whilst insolvent. ?

Many thanks for any responses.

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By Richard Willis
14th Nov 2011 12:14

As long as

no assets of oldco were transferred to newco at preferential rates they have no claim over newco.  However if this is NOT the case then the director(s) of oldco would be guilty of fraudulent preference and it could get nasty if and when oldco is liquidated.  The liquidators may, I fear, be able to come after newco NOT for the CCJ but for the difference between transfer price and market rate for relevant assets.

Either way newco is not a party to the CCJ and can ignore it.

Ed.  Oh BTW, make sure that the details of any transfer of assets is fully documented in case the bailiffs turn up!

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Image is of a pin up style woman in a red dress with some of her skirt caught in the filing cabinet. She looks surprised.
By Monsoon
14th Nov 2011 12:21

Insolvency

NewCo should not have a similar name to OldCo. The ex-director of OldCo is a shadow director of NewCo (assumng he's still involved in the running of it) and could be made personally liable (I think) if trading through NewCo which has a similar name. I don't believe NewCo itself can ever be liable for the debts of OldCo even if it has the same name - the legislation relates to the director behind it, not the new company. I can't remember whether the "prohibited names" rules are a criminal offence with a fine, or whether it makes the director liable - you need to check this. Either way, think about changing the name if there's a problem.

The prohibited names rules only apply to companies in liquidation; if OldCo is simply insolvent then I don't think it matters if NewCo has a similar name - but do read the legislation. I looked it up a while back and it's quite clear.

I don't think there are any consequences for the daughter.

Speak to an insolvency practitioner - like many accountants, many will give free initial consultations.

If OldCo is involvent it cannot pay the debt. NewCo has no liability to pay the debt of OldCo.

You can therefore write to all creditors in OldCo stating it is insolvent and has no funds to appoint a liquidator and that you will be applying for voluntary strike off in due course (yes, you can file DS01 while insolvent but you have to give a copy of the form to creditors within 7 days of filing to give them an opportunity to object, it's a legal requirement). Invite them to either therefore initiate winding up proceedings themselves, or let the strike off go through. Once DS01 has been filed, you basically just sit back and wait.

It sounds to me like the creditor can't really do anything, even with the CCJ.

 

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By Tosie
15th Nov 2011 08:36

many thanks

Thank you both for your help much appreciated.

 

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