Phoenix company: what the insolvency route, the name, the staff and VAT mean when you buy a failed company's assets

Contents

1. Which insolvency route sells you the assets
2. The name: what is barred, what is allowed
3. Staff and TUPE
4. VAT on the purchase
5. Sources

1. Which insolvency route sells you the assets

Short answer: The route decides which protections you get and which rules reach you. An administrator, a liquidator or a pre-pack administrator may sell, and identical assets carry different risks depending on who signs the contract.

A phoenix business is a new business that carries on the trade of a failed company. The people, the premises, the customers or the name often carry over. Buying assets from an insolvent company is not forbidden. The rules in this post decide what you must do, what you inherit and what a later challenge can reach.

Three routes sell business assets out of an insolvency. In administration, an administrator takes control of the company and sells assets inside a statutory process. In liquidation, a liquidator closes the company and sells what is left. In a pre-pack, the buyer and the administrator agree the sale before the appointment and complete it on or soon after appointment (SIP 16 para 1).

An administrator works to three objectives in a fixed order. The first is to rescue the company as a going concern. The second is a better result for creditors as a whole than a winding up without administration. The third is to realise property to pay secured or preferential creditors (Sch B1 para 3).

The third objective is open only when the first two are not reasonably practicable and creditors' interests overall are not unnecessarily harmed (Sch B1 para 3). For you, the useful question is which objective the sale serves. The administrator's proposals and, in a pre-pack, the SIP 16 statement are where the answer sits.

An administrator may do anything necessary or expedient for managing the company's affairs, business and property. A person who deals with the administrator in good faith and for value does not need to enquire whether the administrator is acting within their powers (Sch B1 para 59). Your conclusion: the protection is tied to good faith, so a buyer who knows of a defect cannot lean on it.

A liquidator works under different rules, and two matter to a buyer. A liquidator in England and Wales may disclaim onerous property, meaning unprofitable contracts and property that is unsaleable or not readily saleable. A disclaimer ends the company's rights and liabilities in that property from the disclaimer date (IA 1986 s178(2)-(4)).

The second point is the court's winding up. In a winding up by the court, a disposition of company property made after the winding up starts is void unless the court orders otherwise (IA 1986 s127(1)). That rule has no effect on an administrator's acts while a winding-up petition is suspended under paragraph 40 of Schedule B1 (IA 1986 s127(2)).

Your conclusion: before you pay a seller that is not yet in administration, find out whether a winding-up petition has been presented or an order made, because a sale caught by s127 can be void.

These are the England and Wales versions of the rules. Section 178 is the England and Wales disclaimer power. Section 123 of the same Act has separate limbs for Scotland and Northern Ireland (IA 1986 s123(1)). If the seller is in Scotland or Northern Ireland, the local rules need checking before you rely on this post.

A company can move from one route to another. Section 240 of the Insolvency Act expressly deals with a company that goes into liquidation after administration (IA 1986 s240(3)). Ask the office-holder whether the next step after a sale is liquidation, because that fact changes the name position for any former director who joins you.

A practical split helps. If the seller is in administration, the sale is made by an administrator with statutory powers and a duty to explain the sale. If the seller is in liquidation, the sale is made by a liquidator who may also hold power to disclaim contracts. If the directors are selling before any process, none of these protections exist yet, and the sale is a plain commercial deal with the company's own directors.

Adviser question for this section: a solicitor with insolvency experience can confirm whether a particular seller's process is administration or liquidation, and whether a winding-up petition affects the contract you plan to sign.

2. The name: what is barred, what is allowed

Short answer: The name restriction catches former directors of a company that went into insolvent liquidation, not every buyer. If you are unconnected to those directors, the main name risks are the register and a third party's goodwill.

The restriction sits in section 216 of the Insolvency Act 1986. It applies to a person who was a director or shadow director of a company at any time in the 12 months before the company went into insolvent liquidation. A shadow director is a person who acts as a director without being formally appointed (IA 1986 s216(1)).

Insolvent liquidation means the company goes into liquidation when its assets cannot cover its debts, its other liabilities and the expenses of winding up (IA 1986 s216(7)). A company in administration is not in liquidation. GOV.UK states that the restriction is triggered by insolvent liquidation and not administration.

For five years from the start of the liquidation, such a person may not be a director of, or take part in promoting, forming or managing, a company with a prohibited name. They may not carry on an unincorporated business under such a name either. The exceptions are court leave and the prescribed circumstances (IA 1986 s216(1), (3)).

A prohibited name is any name the failed company used in the 12 months before liquidation, or a name so similar as to suggest an association with it (IA 1986 s216(2)-(3)). GOV.UK reads this to include trading names and brand names the company, or part of it, was known by in that period.

GOV.UK's example runs as follows. If the company was "ABC Limited trading as XYZ", a former director cannot run a company called ABC Limited or XYZ Limited. They also cannot run one that trades as ABC or XYZ, or one with a name suggesting a link to either. A company known by a director's own name carries the same bar on that personal name.

Breach is an offence punishable by imprisonment, a fine, or both (IA 1986 s216(4)). GOV.UK adds that the consequences include prosecution, disqualification as a company director and personal liability for debts.

Here is the conclusion for a buyer who was never a director. The ban targets former directors, so an unconnected buyer is not directly caught. GOV.UK adds that anyone who acts on the instructions of a person they know cannot use the name faces the same penalties.

Now the register. A company must not be registered with a name the same as another name in the registrar's index of company names, and the exceptions come by regulations (CA 2006 s66). Your conclusion: if the seller company is still on the register, a new company cannot take an identical name. Check the index before you build the brand around one.

A third party can also object. A person may object to a registered name on goodwill grounds, goodwill meaning the reputation attached to a name in the market. The statute gives defences in s69(4) and overrides them where the name was chosen in bad faith (CA 2006 s69(1), (4)-(5)). If the old name is common in the trade, a competitor with its own goodwill in that name is a risk.

Brand ownership is a separate step from the register. An assignment of a registered trade mark has no effect unless it is in writing and signed by or for the assignor. A contract to transfer a business is treated as including registered marks unless the parties agree otherwise (Trade Marks Act 1994 s24(1A), (3)).

An unregistered mark that forms part of the business's goodwill is outside that written-assignment rule (Trade Marks Act 1994 s24(6)). Your conclusion: name every mark, domain and trading name in the asset schedule, and ask the office-holder for the registration numbers.

Adviser question for this section: an insolvency solicitor can confirm whether your planned trading name is "so similar as to suggest an association" with the failed company's name, given the 12-month list of names you hold.

3. Staff and TUPE

Short answer: TUPE moves employees and their liabilities to a buyer who takes over a business, and administration and liquidation are treated differently. In administration the employees can transfer with limits on what you inherit. In liquidation the transfer rules in regulations 4 and 7 do not apply.

TUPE means the Transfer of Undertakings (Protection of Employment) Regulations 2006. A relevant transfer is either a business transfer or a service provision change. A business transfer is the transfer of an economic entity that keeps its identity, meaning an organised grouping of resources aimed at carrying on an economic activity (TUPE reg 3).

A transfer may be made through two or more transactions and can occur even if no property passes (TUPE reg 3). Your conclusion: buying machinery, taking the premises and re-hiring the same people to run the same activity can be a transfer even when no contract says so.

The core rule is in regulation 4. A relevant employee's contract continues as if originally made with the transferee, which is you. The transferor's rights, powers, duties and liabilities under or in connection with the contract pass to you, and the transferor's pre-transfer acts are treated as yours (TUPE reg 4).

An employee who objects to the transfer is not treated as dismissed by the transferor. A variation of the contract is void if the sole or principal reason is the transfer, with exceptions. An employee may treat the contract as terminated if the transfer causes a substantial change in working conditions to their material detriment (TUPE reg 4(4)-(9)).

Regulation 7 makes a dismissal automatically unfair if the sole or principal reason is the transfer. The exception is an economic, technical or organisational reason entailing changes in the workforce (TUPE reg 7). Your conclusion: if you plan to cut headcount, write down the economic, technical or organisational reason and the date you decided it.

Insolvency changes the picture. Regulation 8 deals with relevant insolvency proceedings. These are proceedings instituted not with a view to the liquidation of the assets of the transferor and under the supervision of an insolvency practitioner. Administration fits that description (TUPE reg 8).

In relevant insolvency proceedings, statutory scheme sums do not transfer to you under regulation 4. Those sums are covered by Chapter VI of Part XI and Part XII of the Employment Rights Act 1996, and the transferee is not liable for them (TUPE reg 8). Your conclusion: administration limits the arrears and redundancy-type sums you inherit, though it does not remove other liabilities that pass under regulation 4.

Liquidation is treated differently. Regulations 4 and 7 do not apply where the transferor is bankrupt, or is in analogous insolvency proceedings instituted with a view to liquidating its assets, under the supervision of an insolvency practitioner (TUPE reg 8(7)). Your conclusion: a winding up in which the liquidator realises the assets fits that wording.

The result for a buyer from a liquidator is that employees' contracts do not pass to you automatically under regulation 4. It is not a licence to ignore the staff. Employees of the failed company have claims against the failed company, and you will still hire people. Give each person you engage a new written statement of terms.

Permitted variations. In relevant insolvency proceedings, regulation 9 lets an agreed variation stand where the sole or principal reason is the transfer. It must be designed to safeguard employment opportunities by ensuring the survival of the undertaking. It must be agreed with appropriate representatives, in writing and signed (TUPE reg 9).

If signing is not reasonably practicable the representatives can authorise an agent, and the employees must have had copies beforehand (TUPE reg 9). Your conclusion: any change to pay or hours that you want at the transfer must go through this route, with a signed document, or it is at risk of being void.

Pensions. Occupational pension provisions are excluded from regulations 4 and 5. The exclusion does not cover benefits that are not old-age benefits (TUPE reg 10). Ask the office-holder for the scheme documents and a note of what benefits the employees have outside the pension.

Information and consultation. The transferor must give employee liability information at least 28 days before the transfer. It covers each employee's identity and age, their section 1 particulars, disciplinary and grievance matters and claims in the last two years, claims reasonably expected, and applicable collective agreements (TUPE reg 11).

The information must be current to within 14 days before it is notified (TUPE reg 11). In a pre-pack, completion may fall days after the appointment, so 28 days may not exist. Ask the administrator for the information in writing, with its date, and compare it with the staff list in the contract.

Regulation 13 requires the employer to inform and consult appropriate representatives about the transfer (TUPE reg 13). Keep copies of anything you provide to the employer for that purpose.

What it costs if it goes wrong. The transferee and transferor are jointly and severally liable for the compensation due for a failure to inform and consult. A tribunal complaint must be made within the period in regulation 15, which now reads six months (TUPE reg 15). Compensation is up to 13 weeks' pay per employee, as the tribunal considers just and equitable (TUPE reg 16(3)).

A week's pay is worked out under sections 220 to 228 of the Employment Rights Act 1996 (TUPE reg 16(4)). Your conclusion: with nine employees the 13-week maximum can reach a large share of the price, so do not leave this question to completion day.

Adviser question for this section: an employment solicitor can confirm whether regulation 4 passes the contracts of named employees to your business, given the sale route, the staff list and the proposed completion date.

4. VAT on the purchase

Short answer: If the purchase is a transfer of a going concern, no VAT is charged on it, but only when every condition in HMRC's guidance is met. If you treat it as one and it is not, you cannot reclaim VAT charged in error, and a VAT registration number can bring the seller's VAT history with it.

A transfer of a going concern, shortened to TOGC, is a sale of a business, or a part of one, that HMRC treats as outside the scope of VAT. The conditions are in paragraph 1.4 of VAT Notice 700/9. All of them must be met, and the notice sets them out as a list (VAT Notice 700/9 para 1.4).

First, the assets are sold as part of the TOGC. Second, you intend to use the assets to carry on the same kind of business as the seller, and you are in possession of a business. Third, where the seller is a taxable person, you are or become one because of the transfer (VAT Notice 700/9 para 1.4).

Fourth, if only part of a business is sold, that part must be capable of separate operation. Fifth, there must be no series of immediately consecutive transfers (VAT Notice 700/9 para 1.4). Your conclusion: a buyer who plans to pass the assets straight on to another business may fail the fifth condition.

A business can be a going concern when it is trading under the control of a liquidator, an administrative receiver, a trustee in bankruptcy or an administrator (VAT Notice 700/9 para 2.2.1). A sale of capital assets alone is not in itself a TOGC. Your conclusion: a buyer who takes only the machinery and leaves the customers, stock and contracts behind may not meet the conditions.

The registration condition has a timing point. Backdated registration is not enough for a buyer who was not registered when the conditions had to be met (VAT Notice 700/9 para 2.2.4). Your conclusion: if your new company is not yet VAT registered, apply before completion, not afterwards.

Land. If the assets include land that the seller has opted to tax, the buyer must also have opted to tax and notified HMRC by the relevant date. The buyer must tell the seller in writing that the anti-avoidance disapplication in VAT Act 1994 Schedule 10 paragraph 12 does not apply (VAT Notice 700/9 paras 2.3 to 2.3.3).

An option to tax is a choice to charge VAT on a property that would otherwise be exempt. For a premises purchase, ask for the seller's option-to-tax notification and the date it was made, and write the completion steps around the dates in the notice.

The VAT number. A buyer can ask for the seller's VAT registration number to transfer. You request it online or on form VAT68. The form must be completed together with an application to register for VAT (VAT Notice 700/9 para 3.3).

If the number transfers, you take on the VAT liability that comes with it. That includes any outstanding VAT, VAT on stock and assets you keep, entitlement to bad debt relief, and the obligation to repay input tax on supplies unpaid after 6 months. The seller gives up later repayment rights (VAT Notice 700/9 para 3.3).

Your conclusion: taking over the number is optional and has a cost. A phoenix buyer who wants a clean start should compare the benefit of keeping the number against the liabilities in that list. If the number does not transfer, the seller keeps the business records. If it does, the records pass to you (VAT Notice 700/9 para 3.4).

If the TOGC treatment is wrong. If the parties treat a sale as a TOGC and it is not, VAT was due and neither side charged it. If the parties charge VAT and it should have been a TOGC, you cannot reclaim the VAT charged in error as input tax. The seller cancels the invoice and refunds the VAT (VAT Notice 700/9 wrongly-treated section).

In practice, the contract should say whether the parties treat the sale as a TOGC and state which VAT they agree has been charged. Ask the office-holder, not only the seller's accountant, for written confirmation of the seller's VAT registration status and the VAT treatment they will apply.

Your conclusion on pricing: a price quoted "plus VAT" is a different price from one quoted without. Ask for each asset line to be shown with its VAT treatment, so that a later change in treatment does not alter a figure you relied on.

Adviser question for this section: a tax adviser can confirm whether your purchase meets each condition in paragraph 1.4 of VAT Notice 700/9, given the asset schedule, your registration date and the business you will carry on.

Sources

Every page below was opened and read on 2026-11-06. Statute pages show the text in force on that date.

1. Insolvency Act 1986 section 123 (retrieved 2026-11-06)
2. Insolvency Act 1986 section 127 (retrieved 2026-11-06)
3. Insolvency Act 1986 section 178 (retrieved 2026-11-06)
4. Insolvency Act 1986 section 216 (retrieved 2026-11-06)
5. Insolvency Act 1986 section 240 (retrieved 2026-11-06)
6. Insolvency Act 1986 Schedule B1 paragraph 3 (retrieved 2026-11-06)
7. Insolvency Act 1986 Schedule B1 paragraph 59 (retrieved 2026-11-06)
8. Statement of Insolvency Practice 16, pre-packaged sales in administrations (retrieved 2026-11-06)
9. Companies Act 2006 section 66 (retrieved 2026-11-06)
10. Companies Act 2006 section 69 (retrieved 2026-11-06)
11. Trade Marks Act 1994 section 24 (retrieved 2026-11-06)
12. TUPE 2006 regulation 3 (retrieved 2026-11-06)
13. TUPE 2006 regulation 4 (retrieved 2026-11-06)
14. TUPE 2006 regulation 7 (retrieved 2026-11-06)
15. TUPE 2006 regulation 8 (retrieved 2026-11-06)
16. TUPE 2006 regulation 9 (retrieved 2026-11-06)
17. TUPE 2006 regulation 10 (retrieved 2026-11-06)
18. TUPE 2006 regulation 11 (retrieved 2026-11-06)
19. TUPE 2006 regulation 13 (retrieved 2026-11-06)
20. TUPE 2006 regulation 15 (retrieved 2026-11-06)
21. TUPE 2006 regulation 16 (retrieved 2026-11-06)
22. GOV.UK, Re-use of company names (retrieved 2026-11-06)
23. GOV.UK, Transfer a business as a going concern, VAT Notice 700/9 (retrieved 2026-11-06)