This is called passing off and under section 216 Insolvency Act 1986 it can lead to criminal action against the director or being held liable for all of the debts of the new company should it too go into liquidation. It is possible to buy the name through administration, or the liquidator can agree to sell the name and a court application can support this.
However, any court application will need to show why the rules of section 216 should not apply to you. It should be borne in mind that if you were to buy the business you will need to pay a fair price and this will have been valued by a chartered surveyor or asset valuer.
However if this was not the first time that one of your companies has gone into liquidation, and HMRC were a large creditor, then they may insist on a VAT or PAYE deposit to protect their position.
This section applies to a person where a company (the liquidating company) has gone into insolvent liquidation on or after the appointed day and he was a director or shadow director of the company at any time in the period of 12 months ending with the day before it went into liquidation.
The process is based on making the benefits of using Sections 1003 to 1008 of the Companies Act 2006 (formerly Section 652 of The Companies Act 1985) available to your limited company.
This process is used to have a company struck from the Companies House Register and dissolved.
The company’s liabilities must be paid first, any remaining surplus will then be distributed to the shareholders.
Companies that are no longer viable often have no alternative but to cease operations.
However, this process is more difficult than simply ceasing to conduct business.
The other problem of setting up a new company with a similar name is that it can result in bad feelings between creditors and the company as people believe that the directors are being disingenious by using the same or similar name even if it is all done by leave of the court.
In essence there is nothing to stop you setting up a new company just because a previous one under your control has gone into liquidation.