Short answer: If a customer goes into insolvent liquidation and the same people carry on trading through a new company, your invoice normally stays with the old company, and you claim it from the liquidator. The new company is not liable just because it looks the same. Directors can become personally liable, though, if the new company uses the old name or a similar one without one of the legal exceptions (sections 216 and 217 of the Insolvency Act 1986). Gather evidence, tell the liquidator, and protect yourself before supplying the new company on credit.
A familiar story for suppliers runs like this. An invoice goes unpaid, the customer stops replying, and a few weeks later an insolvency practitioner writes to say the company is in liquidation. Then you see the same directors, the same premises and almost the same name trading as a brand-new company. That is often called a phoenix company.
This guide is general information for UK businesses, not legal advice. It covers companies in England and Wales. Sources were checked on 29 October 2026: section 216 and section 217 of the Insolvency Act 1986, rules 22.4, 22.6 and 22.7 of the Insolvency (England and Wales) Rules 2016, and the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021.
Who owes you the money?
| Situation | Who is liable | Usual route |
|---|---|---|
| Old company ordered and was invoiced, then went into liquidation | The old company | Proof of debt to the liquidator |
| New company ordered after the old one failed | The new company | Normal chasing, letter before action and collection |
| New company uses a prohibited name without an exception | The new company, plus the director personally for debts incurred while they managed it (s.217) | Claim against the new company and the director; take legal advice |
| A director signed a personal guarantee for the old company | The director, under the guarantee | Claim against the guarantor |
The proof of debt process is explained in our guide to a customer in administration or liquidation. A guarantee is a separate promise and survives the company's failure. See personal guarantees on unpaid B2B invoices.
The prohibited name rule
Section 216 applies to anyone who was a director or shadow director of a company in the 12 months before it went into insolvent liquidation. For five years from the liquidation they must not, without the court's permission or a prescribed exception, be a director of, or be involved in forming or managing, a company known by a prohibited name. A prohibited name is any name the old company used in those 12 months, or one so similar that it suggests a link. Breaking the rule is a criminal offence.
The rules set out three exceptions:
- Buying the business from the insolvency practitioner (rule 22.4). Where the whole or substantially the whole business is bought from the liquidator or administrator, the director can use the name if they give notice to every creditor they know of or can reasonably find, and publish it in The Gazette, no later than 28 days after the deal completes.
- Applying to court quickly (rule 22.6). If the director applies for permission within seven business days of the liquidation, they can act for up to six weeks, or until the court decides, whichever comes first.
- An established company (rule 22.7). The rule does not bite where the other company had been known by that name for the whole 12 months before the liquidation and was not dormant in that time.
If you received a notice under rule 22.4, keep it. It shows the exception was used, which usually means the director is not personally liable under section 217.
Personal liability under section 217
A person who is involved in managing a company in breach of section 216 is personally responsible for that company's debts incurred while they were involved. So is someone managing the company who knowingly takes instructions from such a person. The liability is joint and several with the company, so you can claim the whole debt from them. It covers the new company's debts, not the old company's invoices. If you supplied the new company and it has not paid, this can turn an unpaid invoice from a company with no assets into a claim against an individual.
Pre-pack sales to the old directors
Many phoenix businesses start with a pre-pack administration, where the business is sold soon after the administrator is appointed. Under the 2021 regulations, a sale of all or a substantial part of the business to a connected person, such as a director, in the first eight weeks of administration needs either the approval of creditors or a qualifying report from an independent evaluator. Ask the administrator for the evaluator's report and the statement of how the sale price was arrived at, if they are not in the first report to creditors.
What to do now
- Check the register. Search both companies on the Companies House register. Note directors, registered offices, incorporation dates and earlier names.
- Keep the evidence. Save websites, emails, letterheads and social media showing the new company trading from the same premises or under the same brand.
- Submit your proof of debt to the liquidator for the old company's invoices, with your supporting documents.
- Tell the liquidator what you know. Office-holders must report on directors' conduct, and they can bring claims for transactions that moved value out of the old company.
- Report misconduct to the Insolvency Service if you think the rules were broken.
- Protect new supplies. Before giving the new company credit, ask for payment up front, a personal guarantee, or retention of title terms.
Many failures give warnings first, such as part payments and missed filings. Our guide to insolvency warning signs covers what to look for. If you have paid VAT on an invoice that will not be paid, VAT bad debt relief may help.
Frequently asked questions
What is a phoenix company? It is a new company that carries on the business of an old company that has gone into insolvent liquidation, usually with the same directors and often a similar name. Phoenixing is not unlawful in itself, but it can be when the rules on re-using names are broken or when assets are moved to avoid creditors.
Is the new company liable for the old company's unpaid invoice? Usually not. The new company is a separate legal person, so the old company's debt stays with the old company and is claimed from its liquidator by proof of debt. The new company is only liable for invoices it ordered itself, or where it clearly agreed to take on the debt.
When can a director be personally liable for a phoenix company's debts? Under section 216 of the Insolvency Act 1986, a director of a company that went into insolvent liquidation must not, for five years, be involved with another company using the same or a confusingly similar name, unless an exception applies or the court gives permission. If they are, section 217 makes them jointly and severally liable for the new company's debts incurred while they were involved in managing it.
What are the exceptions to the prohibited name rule? The Insolvency (England and Wales) Rules 2016 set three: where the business is bought from the liquidator or administrator and notice is given to creditors and published in The Gazette within 28 days (rule 22.4); where the director applies to court within seven business days of liquidation, giving temporary cover for up to six weeks (rule 22.6); and where the other company already used the name for the full 12 months before the liquidation and was not dormant (rule 22.7).
Can I chase the old company's debt from the new company if I keep supplying it? No. Keep the two accounts separate. Put the new company's full registered name and number on new invoices, take fresh credit checks, and consider payment up front or a personal guarantee before giving the new company credit.
What is a pre-pack sale to the old directors? It is a sale of the business agreed before an administrator is appointed and completed soon after. Since 30 April 2021, a sale of all or a substantial part of the business to a connected person in the first eight weeks of administration needs either creditor approval or a report from an independent evaluator, under the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021.
How do I report a director I think has acted wrongly? Tell the liquidator or administrator what you know, because they must report on directors' conduct. You can also report misconduct to the Insolvency Service, which can investigate and seek a director disqualification.
Can your partner recover a debt from a phoenix company? We are an introducer, not solicitors, insolvency practitioners or an FCA-authorised firm. A debt owed by a company in liquidation usually has to be claimed through the liquidator. Where a solvent Ltd, LLP or PLC owes you its own undisputed invoice and our partner accepts it, the fee is 15% of what is recovered, payable only when you have been paid. Recovery is not guaranteed.
If a solvent Ltd, LLP or PLC, including a new company that ordered from you itself, owes you an undisputed invoice, upload the invoice via business debt collection or read how no collection, no fee works. The fee is 15% of what is recovered, payable only when you have been paid. Recovery is not guaranteed.