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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3695
Experience:  Solicitors 2 years plus PQE
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If we close down a Limited company while there is a Passing

Customer Question

If we close down a Limited company while there is a Passing Off claim being made - this has not gone to court yet, just threats, and then start a new business with a completely different name - can they still re-open the old company, or go after the new company?
Submitted: 3 years ago.
Category: Law
Expert:  Alex J. replied 3 years ago.
Hi,
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
They can only bring a claim against the party with which they have a cause of action i.e the old company - if this company is liquidate or dissolved, then they would not be able to continue proceedings against it.
If the new company has not been guilty of passing off in any then they will not be able to bring a claim against the new company.
Can you give me any further details?
Kind regards
AJ
Customer: replied 3 years ago.

Hi,

Thanks for the reply.

They are sending us letters at the moment saying they want to pursue legal actions unless we meet their demands - we cant afford to argue this in court, so think its better just to close the company down - but wanted to know if we can do this now, or if they go to court.

Thanks

Expert:  Alex J. replied 3 years ago.
Hi,
Thank you.
You can close the company down at any time.
If you wait until they actually commence the proceedings and tell you might do this, the risk is they may seek security for costs from the directors or shareholders.
If this claim is that prohibitive and starting a new company is actually a viable option, I would not wait and just start the new co as soon as possible.
Kind regards
AJ
Customer: replied 3 years ago.

Thank you,

I understand it can take a bit of time to wind down a company, could we start this process, and they would not be able to bring any proceedings, or would this not work?

I am the only shareholder / director in the company - the company is tiny and has only got 3 shares at £1 each - is this the maximum I would be liable for ?

Expert:  Alex J. replied 3 years ago.
Hi,
Thank you.
If you have not given any personal guarantees then yes your liability as a shareholder is limited to the paid up share capital.
As a director you could potentially be liable for the passing off - however if you simply discontinue the infringing act now, it is very unlikely you will be held jointly liable.
A company can be dissolved under the Companies Act 2006 S.1003 if:
- It has not traded within the last 3 months
- Not changed the company name within the last 3 months
- Is not subject to any legal proceedings, current or proposed
- Has not made a disposal for value of property or rights.
Potentially they could object to you dissolving the company, but if in dissolving the company you effectively stopping the infringing act, they are unlikely to start throwing any money pursuing a company that has stopped trading.
Kind regards
AJ
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Customer: replied 3 years ago.

Just a follow up,

If we can sell the company to a new company (where myself and another is a director), would this then make the 'old' company closed for this legal purpose? Could they then still go after the 'new' company ?

Expert:  Alex J. replied 3 years ago.
Hi,
Thank you.
What are you going to do sell the assets to the new company or sell the whole company?
Ideally you just want to set up and start again with the infringing act?
Kind regards
AJ
Customer: replied 3 years ago.

Hi,

What ever would be easier, we were not infringing, they are just claiming the name is ***** ***** and this in itself is arguable, but will result a large legal bill - I don't believe they wont go further if we just say we will change the name / close down the company, and they will want damages of sorts.

So am trying to work out the fastest way to get rid of the 'old' company.

Expert:  Alex J. replied 3 years ago.
Hi,
Thank you.
Have you just considered just changing the name of the old company?
Kind regards
AJ
Customer: replied 3 years ago.

Hi,

Yes, but we feel they will still want to proceed with the claim for damaged (not that there would be any), and this would just add to the legal costs.

We are notifying them that we will change our name, but thinking worst case and that they keep on going ..

Expert:  Alex J. replied 3 years ago.
Hi,
Thank you.
Is it a passing off claim or Trade Mark Infringement claim?
Have they actually itemised any damage suffered?
Kind regards
AJ
Customer: replied 3 years ago.

Hi,

Its a passing off claim, based on that our names are ***** ***** and we have been misrepresenting ourselves as them and that they do the same services as we do - which they dont advertise as they do it (we used to be employed by them as well so does get a little bit more in depth).

No itemized list - they wish to have a list of our customers that we directly, or indirectly, intentionally or unintentionally made any representation that our company was involved with their company.

Expert:  Alex J. replied 3 years ago.
Hi,
Thank you.
I think reasonably you do not have to give them a list of your sensitive commercial data.
Without admitting liability have you offered to just change your name? If so what has been their response?
Kind regards
AJ
Customer: replied 3 years ago.

Hi,

This is our current step - to mention that we are changing our company name.

Hopefully they will take this, but I personally suspect not, and just want to plan for in-case they come back saying its unacceptable and continue with the legal action.

Customer: replied 3 years ago.

They have their own legal department in house, so their legal costs are quite low compared to ours..

Expert:  Alex J. replied 3 years ago.
Hi,
Thank you.
A passing off claim is to "ride on the back of the reputation of another to take an unfair commercial advantage".
Is there are actually any likelihood of confusion,or any evidence of lost business?
These are such expensive actions to run, that if you volunteer to stop using the name I find it hard to see on what grounds they could justify spending the money to pursue an expensive litigation against a company that may simply close its doors.
kind regards
AJ