Section 216 of the Insolvency Act 1986.
The strongest tool against phoenix directors.
If the director who liquidated the company that owes you money has since set up a new company in the same trade, often at the same address, often with a similar name, s.216 of the Insolvency Act 1986 makes that a criminal offence, and s.217 makes the director personally liable for the new company\'s debts, automatically, without you having to prove dishonesty.
This page explains exactly what the law prohibits, what the three lawful exceptions are, and what evidence a solicitor needs from you before they\'ll take the case.
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What the law actually says
The prohibition, in plain English.
A person who was a director of a UK company at any point in the twelve months before that company entered insolvent liquidation cannot, for five years from the date of that liquidation:
- be a director of any other company that uses the same name, or a name "so similar as to suggest an association";
- be involved in the management or formation of any such company;
- be involved in the carrying on of a business under the same or similar name, even outside a company structure.
Breach is a criminal offence under s.216(4), punishable by imprisonment, a fine, or both. And under s.217, the director becomes personally liable for "all relevant debts" of the new company for as long as the breach continues.
Why this matters for creditors
Most creditor remedies against directors (fraudulent trading under s.213, wrongful trading under s.214, misfeasance under s.212) require you to prove something difficult, actual fraud, recklessness, or breach of duty. Section 217 is different. The breach is the breach. If the s.216 prohibition was crossed, personal liability follows automatically. That is why s.216-217 is the strongest single tool in UK law for phoenix-pattern creditor recovery.
The three lawful exceptions
How a director can lawfully re-use the name.
Insolvency (England and Wales) Rules 2016 r.22.4-22.7 sets out three specific exceptions. If the director relied on none of these, the re-use is a s.216 breach.
Exception 1, Notice to creditors (r.22.4)
The director sends a prescribed notice to all creditors of the insolvent company, within 28 days of the new company beginning to act under the prohibited name. Notice must be in the specified form and reach all known creditors. Most phoenix directors skip this step entirely, which means they\'re in breach.
Exception 2, Court leave (r.22.5)
The director applies to the court for leave to act under the prohibited name. The application must be made within seven days of the insolvent liquidation. Court leave is rarely sought because most directors don\'t know about the requirement until a creditor flags it.
Exception 3, Established successor (r.22.6-22.7)
The new company has been known by the prohibited name throughout the 12 months before the original\'s insolvency, and was not dormant. This covers the legitimate case of a group restructure, not the typical "set up new Ltd two months ago to take over the work" pattern.
If none of the three apply, it\'s a breach.
The default position when a director re-uses a prohibited name is that they are in breach of s.216 and personally liable under s.217. The burden is on the director to show they relied on one of the three exceptions, not on you to disprove all of them.
The evidence pack, assembled from public Companies House data in 90 seconds.
You enter the original (dissolved or liquidated) company\'s name. RecoupIQ pulls: the liquidation date, every director in office in the 12 months before liquidation, every other UK company those directors have since been appointed to, any names that match the s.216 similarity test, and any visible asset transfers. Delivered as a PDF you can hand straight to a solicitor or the Insolvency Service.
Start a Forensic Report, £167Frequently asked
What does Section 216 of the Insolvency Act 1986 actually prohibit?
Section 216 prohibits a person who was a director of a company in the 12 months before its insolvent liquidation from being a director of, or being involved in the management of, any other company that uses the insolvent company's name or a name "so similar as to suggest an association", for a period of five years from the date of liquidation. Breach is a criminal offence under s.216(4) carrying imprisonment, a fine, or both.
What does Section 217 do?
Section 217 makes the director personally liable for all relevant debts of the new company while they are in breach of s.216. This is automatic, creditors of the new company can sue the director directly, without having to prove fraud or dishonesty. The personal liability is joint and several with the company itself and anyone else acting on the director's instructions while knowing of the s.216 breach.
What counts as "so similar as to suggest an association"?
The courts apply a practical test: would an ordinary member of the public think the two businesses are connected? Cases have caught: "Smith Plumbing Ltd" → "Smith Plumbing Services Ltd"; "Acme Builders (Bristol) Ltd" → "Acme Construction Bristol Ltd"; trading-name overlap even where the formal name differs; adding "(2024)" or "Holdings" to an old name. The test is association in the mind of customers and creditors, not a strict character-by-character comparison.
Are there any lawful exceptions?
Yes, three, under the Insolvency (England and Wales) Rules 2016 r.22.4-22.7. (1) Notice of intention to act, the director gives prescribed notice to all creditors of the insolvent company within 28 days. (2) Court leave, the director applies for and obtains the court's permission. (3) Successor-company exception, the new company has been known by the prohibited name for the whole 12 months prior to the insolvency, and was not itself dormant. Most "phoenix" cases meet none of these.
How do I know if a new company is a Section 216 phoenix?
The pattern is publicly visible from Companies House data. You need: (1) the dissolved/liquidated company's details including liquidation date; (2) every director who was in office in the 12 months before liquidation; (3) every other UK company those directors have since been appointed to; (4) any of those companies with a name similar to the original. RecoupIQ's £167 Forensic Report assembles all of this from public Companies House data in 90 seconds.
Can I sue the phoenix-director myself without a solicitor?
For debts under £10,000, yes, you can issue a claim in the small claims track of the County Court. For larger amounts, formal representation is usually required. Many creditors instead report the s.216 breach to the Insolvency Service via the dedicated complaint route, which can trigger a criminal prosecution and director disqualification under Company Directors Disqualification Act 1986 s.6, in parallel with private civil recovery.
What about the five-year clock?
It runs from the date the original company entered insolvent liquidation, not the date it was dissolved or struck off. So a company liquidated in March 2024 means the prohibition runs until March 2029. After five years the director can lawfully use the name again, though a fresh insolvency on the new company restarts the clock for that director.
Does Section 216 apply to LLPs and sole-traders?
Section 216 applies only to companies (Limited or PLC) and their directors. It does not apply to LLPs (different statutory regime), sole-traders, or general partnerships. However, the underlying behavioural pattern, running up debts in one entity and re-emerging in another, can be challenged under other tools including transactions at undervalue (Insolvency Act 1986 s.238) and preferences (s.239) within the relevant lookback periods.