Can I Be a Director After Liquidation?
Thinking of becoming a director after liquidation? Understand the rules, disqualification risks and company name restrictions before taking your next step.
A director’s guide
Wondering if you can be a director again after your company has gone through liquidation? Here’s what you need to know about the rules, restrictions, and how to avoid common pitfalls.
The general rule
If your company has been liquidated, you are generally allowed to become a director of another company. However, there are important exceptions and restrictions.
When can you be restricted or disqualified?
1: Director disqualification
If your conduct as a director was found to be “unfit” (for example, failing to keep proper records, trading while insolvent, or acting dishonestly), the court can make a disqualification order. This means you cannot be a director, or take part in the management or formation of any company, for a set period (usually 2 to 15 years) unless you get special permission from the court.
Acting as a director while disqualified is a criminal offence and can make you personally liable for company debts.
2: Restrictions on company names (Section 216, Insolvency Act 1986)
If you were a director (or shadow director) of a company in the 12 months before it went into insolvent liquidation, you cannot be involved in a new company with the same or a similar name for five years, unless you follow strict legal procedures.
This rule is designed to prevent “phoenix companies” (where a new business rises from the ashes of the old one, leaving creditors unpaid).
The restriction covers not just being a director, but also being involved in the management, promotion, or running of the new business.
What counts as a “prohibited name”?
The same name as the liquidated company, or a name so similar it suggests an association with the old company.
What happens if you break this rule?
It is a criminal offence: you could be fined, imprisoned, or disqualified as a director. You could also be personally liable for the new company’s debts.
Are there any exceptions?
Yes, you can use the same or similar name if:
- You get permission (“leave”) from the court before starting the new business or
- You follow one of the statutory exceptions, such as giving proper notice to all creditors if you buy the old company’s business through a formal process, or if the new company has used the name for at least 12 months before the old company’s liquidation and was not dormant
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How can directors reduce their risk?
While the risks are real, there are practical steps you can take:
- Keep good records: Document all decisions, especially around insolvency or business closure
- Stay informed: Monitor your company’s financial position closely and act quickly if problems arise
- Seek professional advice early: If you’re unsure about your responsibilities or the rules, consult an insolvency practitioner or solicitor as soon as possible
- Follow legal procedures for company names: If you want to use a similar name, make sure you obtain legal advice and follow the correct process
- Avoid acting while disqualified: Never act as a director or manage a company if you are subject to a disqualification order
Key takeaways
- Directors are usually free to take up new directorships after liquidation, but there are important restrictions
- Disqualification orders and the rules on re-using company names can prevent you from being a director or make you personally liable for debts
- Good governance, early action, and professional advice are your best defences
- If you’re unsure about your position, seek expert advice before taking any steps
Need expert guidance?
If you have concerns about becoming a director after liquidation, or if you need help understanding your responsibilities, don’t wait to obtain professional advice. Acting early is the best way to protect yourself and your future business interests.
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