Background
Brian English was a director of Insignia Blind Co Ltd, which went into insolvent liquidation on 22 January 2020. Before the liquidation and continuing after it, English operated as a sole trader using the business name “Insignia Shade and Shutter Company”—a name he had personally owned and used continuously since 1997. After the company’s failure, he continued trading under similar names including “Insignia Blind Services” and “Insignia.”
The Insolvency Service determined that English was breaching section 216(3)(c) of the Insolvency Act 1986, which prohibits former directors from participating in non-corporate businesses carried on under a “prohibited name”—one that is the same as or deceptively similar to the name of an insolvent company. Despite warnings, English continued operating under the disputed names. He was convicted in November 2024 and sentenced to a conditional discharge for two years with a three-year director disqualification.
English appealed by case stated, arguing that rule 22.7 of the Insolvency (England and Wales) Rules 2016 (the “Third Excepted Case”) should be interpreted to protect established, actively-trading sole traders just as it protects established companies—namely, businesses that have continuously used the name for 12 months or more before the liquidation and have remained active.
The Court’s Holding
Fordham J dismissed the appeal, holding that rule 22.7 does not apply to unincorporated businesses. The court rejected the appellant’s invitation to read “business” into a rule that expressly refers only to “the company there referred to.” The natural and ordinary meaning of the rule’s language clearly limits the exception to corporate entities.
The court found that this interpretation is neither unfair nor irrational. The rule-maker (the Lord Chancellor) deliberately designed the exception around readily ascertainable, objective corporate dormancy standards drawn from the Companies Act 2006. These corporate statutory tests—measuring whether a company is “dormant” by reference to significant accounting transactions—cannot sensibly be applied to non-corporate sole traders and partnerships. The legislature extended the prohibition itself to cover non-corporate businesses (in section 216(3)(c)) but did not extend the dormancy-based exception to them, a distinction the court found express and deliberate.
Critically, the court emphasized that former directors are not left without remedy. Section 216(3) permits the court to grant discretionary leave to use a prohibited name. A former director can apply to court and, if the application is made promptly, it has suspensive effect under rule 22.6. The court is then positioned to consider all circumstances and grant leave where the mischief—protecting creditors and the public from phoenix-company deception—is not present, as in the case of a genuinely established, active business.
Key Takeaways
- The section 216(3) soundalike name prohibition extends to non-corporate sole traders and partnerships (Limb c) but the dormancy-based exception in rule 22.7 does not.
- Statutory language must be given its natural and ordinary meaning; courts cannot rewrite rules to add “business” where the rule says “company” without ultra vires grounds.
- Even where a prohibition is wider than its underlying policy mischief (phoenix trading), the legislature may intend such breadth, leaving court discretion to grant leave as the release valve.
- Former directors may still apply to the court for permission under section 216(3), where established and active business status can be argued.
- Readily ascertainable, statutory objective standards (corporate dormancy provisions) are preferable to judge-made subjective criteria when designing safe-harbor exceptions from criminal liability.
Why It Matters
This decision significantly affects sole traders and other unincorporated business operators. A long-established business using a name suggestively similar to a failed company receives no automatic protection from the soundalike name prohibition merely because it predates the company’s failure and remained active. Instead, such operators must affirmatively seek leave from the court, bearing the cost and uncertainty of litigation—even if their business pose no genuine phoenix-trading risk.
The ruling reinforces the strict statutory approach to section 216: its language is plain, its scope is broad, and courts will not rewrite exceptions to soften its application. Directors and business owners cannot rely on equitable fairness arguments or purposive construction to escape the prohibition; they must engage the judicial leave mechanism. The decision also signals that corporate-specific statutory regimes (like dormancy provisions) will not be retrofitted to apply to non-corporate entities through interpretation, even where analogy might seem fair.