Penrose and Another v Official Receiver
| Jurisdiction | England & Wales |
| Judgment Date | 18 October 1995 |
| Date | 18 October 1995 |
| Court | Chancery Division |
Chancery Division
Before Mr Justice Chadwick
Insolvency - prohibited company name - discretion of court to approve director
In exercising its discretion whether to allow a director of a company which had gone into insolvent liquidation to be a director of a company with a similar name, the court should have regard only to the purpose of section 216 of the Insolvency Act 1986 and the mischiefs it was designed to eliminate.
Therefore, it was not normally appropriate to take into account the risk that the new company might fail by reason of the lack of experience of its directors and under-capitalisation.
Mr Justice Chadwick so held in the Chancery Division, sitting at the Birmingham District Registry, on an appeal from District Judge Sankey who had dismissed an application by Timothy James Alan Penrose and Ruth Finch Penrose for leave, pursuant to section 216(3) of the 1986 Act to be directors of a company known as Hudsons Coffee Houses (Holdings) Ltd. The Official Receiver opposed the application.
Mr Michael Fay for the applicants; Miss Sandra Bristol for the Official Receiver.
MR JUSTICE CHADWICK said that the applicants sought the leave of the court pursuant to section 216(3) of the 1986 Act to continue trading through a new company which bore a name that was the same as or closely similar to that of a company which had gone into insolvent liquidation and of which they had been directors.
The name of the old company was Hudsons Coffee Houses Ltd. It was ordered to be wound up by the court on the ground that it was unable to pay its debts and was undoubtedly an insolvent company for the purposes of section 216.
The name of the new company was Hudsons Coffee Houses (Holdings) Ltd and there was no doubt that that was a prohibited name for the purposes of section 216(2).
The Official Receiver's report concluded that on the evidence available the cause of the old company's failure was "the withdrawal of bank overdraft facilities, rapid expansion, lack of capital, inexperienced management and inadequate controls aggravated by declining turnover due to a downturn in trade in the shopping developments".
The district judge did not take the view that trading under the name of the new company was going to cause any risk or detriment to the creditors of the old company; nor that the use of the new company's name was going to lead to expropriation out of the assets of the old...
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