Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill

Published: 17/05/2021 By Martin Armstrong

Directors beware!

The Bill received its first reading in Parliament on 12th May. The Insolvency Service are being given powers to investigate directors of companies that have been dissolved, closing a legal loophole and acting as a strong deterrent against mis-use of the dissolution process. The powers are retrospective.

Extension of the power to investigate includes relevant sanctions including disqualification from acting as a company director for up to 15 years. At present this only applies to live or insolvent companies where wrongdoing or malpractice is found.
It is also aimed at preventing:

  • Directors fraudulently avoiding repayment of Government backed loans given to businesses to support them during the pandemic.
  • Directors of dissolved companies setting up a near identical business after the dissolution, leaving customers, suppliers and HMR&C unpaid.

I have seen many instances over the years where directors have either applied for dissolution or allowed a company to be dissolved, knowing it has outstanding liabilities, rather than obtaining proper advice and going through a formal insolvency process. I think it is likely that this will automatically be construed as unfit conduct and leave those involved, whether actual named directors or “de facto” directors, open to disqualification.

The Business Secretary has said “We will not hesitate to disqualify directors who leave employees and the British taxpayer out of pocket....Extending powers to investigate directors of dissolved companies means those who have previously been able to avoid their responsibilities will be held to account”.

If you require further information or have a client who requires a free initial meeting feel free to contact me or one of my team.

Martin Armstrong
Senior Partne

020 8661 7878 (o)
07836 200551 (m)