Directors of Dissolved Companies to be Investigated
The Insolvency Service has just reported that they will be given the power to investigate Directors of dissolved companies, closing the current legal loophole, aiming to act as a strong deterrent for misuse of the process.
It is alleged that dissolution is being used to avoid repayment of the Government backed loans fraudulently obtained and the new bill has come about as a reaction to the dishonesty shown during the Coronavirus pandemic. This includes bounce back loans.
At present, the Insolvency Service only has powers to investigate Directors of live companies or those entering a form of insolvency.
Company Directors can expect to face up to 15 years disqualification if they misuse the support they have been given. These powers will be exercised by the Insolvency Service.
The measure will also help to prevent Directors of dissolved companies from setting up a near identical business after the dissolution, which often leaves customers and other creditors, such as suppliers or HMRC, unpaid.
Business Secretary Kwasi Kwarteng said:
“As we build back better from the pandemic, we need to restore business confidence, but also people’s confidence in business – which is why we will not hesitate to disqualify directors who deliberately leave employees and the British taxpayer out of pocket.
We are determined that the UK should be the best place in the world to do business. Extending powers to investigate directors of dissolved companies means those who have previously been able to avoid their responsibilities will be held to account.”
This may see a reduction in dissolutions and more Company Directors seeking the advice of qualified Insolvency Practitioners.