Published: 11/01/2022 By Hannah McCormackLast month new powers were given to the Insolvency Service against unfair directors who dissolve their companies to avoid paying their liabilities due. The new legislation extends the Insolvency Services powers to be able to investigate and disqualify these rogue directors. This goes hand in hand with the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill which our senior Partner Martin Armstrong talked about in our latest webinar which you can view here or read our blog on the Act here . The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill will also help to whittle out those directors who shut down companies to avoid repaying the support loans given by the Government which helped business through the pandemic.
Business Secretary Kwasi Kwarteng said:
“We want the UK to be the best place in the world to do business and we have provided unprecedented support to businesses to help them through the pandemic. These new powers will curb those rogue directors who seek to avoid paying back their debts, including government loans provided to support businesses and save jobs. Government is committed to tackle those who seek to leave the British taxpayer out of pocket by abusing the covid financial support that has been so vital to businesses”
The Insolvency service investigative powers will be extended to directors of companies that are already dissolved and if misconduct is found the director will face serious consequences including prosecution. The new act also allows the Business Secretary to apply to the court for an order to require former directors who have been disqualified to pay compensation to creditors who have suffered due to their fraudulent behaviour.
Stephen Pegge, Managing Director of UK Finance, said:
“The ability to dissolve a company when necessary is a right reserved in legitimate circumstances where there are no outstanding creditors, however, it can be open to abuse. The banking and finance industry therefore supports this legislation which will provide much needed powers to the Insolvency Service to help hold rogue directors to account by providing additional deterrents and easier enforcement of the rules.”
For reference and more information see - https://www.gov.uk/government/news/crackdown-on-directors-who-dissolve-companies-to-evade-debts