whether to declare a liability to contribute and subsequent issues of quantum.139

‘Phoenix’ provisions

Personal liability for directors also arises in relation to sections 216 and 217 of the Insolvency Act 1986, the provisions designed to deal with the ‘phoenix syndrome’. These sections prohibit a director of a company that has entered insolvent liquidation from being involved, for the next five years, in the management of a company using the same name as the insolvent company or a name so similar as to suggest an association with

it.140 The prohibition covers using any name by which the old company was known141 and even a name that has not been used for trading but has

been used internally as a promotional shorthand name.142 The rule also applies to any director who has left a company within twelve months of liquidation. Breach of the rule involves civil or criminal liability and the major effect is to make the person concerned personally liable to contribute towards the debts of the ‘new’ company.143 An individual may seek the court’s leave to act as the director of a similarly named company, however, and there is evidence that the courts will be well disposed to

grant such leave where the applicant was not to blame for the failure of the initial company.144 An advantage of sections 216 and 217 to the

creditor is that these provisions allow an individual to bring an action to

139For further discussion of the wrongful trading provisions in the context of efficiency see pp. 741–3, 746–9 below.

140Archer Structures Ltd v. Griffiths [2004] BCC 156. See M. Tempest, ‘Re-use of Company Names’ (2006) Recovery (Summer) 25; T. Mayer, ‘Personal Liability for Trading in a Prohibited Name’ (2006) 27 Co. Law. 14; Carter, ‘Phoenix Syndrome’; Frith, ‘Acting as a Director of a Phoenix Company’. On exceptions to the ss. 216 and 217 rules (outlined in the Insolvency Rules 1986 (SI 1986/1925) (amended in 2007: see below), particularly rr. 4.227–4.230) see ESS Production Ltd v. Sully [2005] BCC 435; Commissioners for HM Revenue & Customs v. Walsh [2006] BCC 431. In Churchill v. First Independent Factors and Finance Ltd [2007] BCC 45 the Court of Appeal adopted a literal and inconvenient interpretation of (the then) r. 4.228 and precluded its usage for notice of business transfers to successor companies unless the director in question had taken up appointment after the notice was given. The Churchill case led to a revision of the Insolvency Rules: see Insolvency (Amendment) Rules 2007 (SI 2007/1974) effective from 6 August 2007.

141Commissioners of Inland Revenue v. Nash [2003] BPIR 1138.

142ESS Production Ltd v. Sully [2005] BCC 435.

143On the operation of s. 217 see Thorne v. Silverleaf [1994] 1 BCLC 637; Commissioners of Inland Revenue v. Nash [2003] BPIR 1138; First Independent Factors and Finance Ltd v.

Mountford [2008] EWHC 835 (Ch).

144See Penrose v. Official Receiver [1996] 1 BCLC 389; Re Lightning Electrical Contractors Ltd [1996] 2 BCLC 302; Rule 4.227 Insolvency Rules 1986; Churchill v. First