New powers to fight unfit directors of dissolved companies
The Insolvency Department should be empowered to investigate directors of companies that have been dissolved, which fills a legal loophole and acts as a powerful deterrent against misuse of the dissolution process.
The process can no longer be used as a method to fraudulently avoid repayment of government-guaranteed loans given to businesses to support them during the coronavirus pandemic.
The extension of the investigative power also includes the relevant sanctions such as a ban on acting as a director of the company for a period of up to 15 years. These powers will be exercised by the Insolvency Department on behalf of the Business Secretary.
Currently, the Insolvency Department has the power to investigate directors of active companies or those in some form of insolvency. In the event of wrongdoing or professional misconduct, directors may face penalties, including a 15-year ban.
The measure will also help prevent directors of dissolved companies from starting a nearly identical business after dissolution, often leaving customers and other creditors, such as suppliers or HMRC, unpaid.
The measures included in the bill on ratings (coronavirus) and the disqualification of directors (dissolved companies) are retrospective and will allow the insolvency department to also tackle directors who have inappropriately liquidated companies that have benefited from rebound loans.
Business Secretary Kwasi Kwarteng said: As we rebuild better after the pandemic, we need to restore business confidence, but also people’s trust in business – that’s why we will not hesitate to disqualify directors who are deliberately leaving employees and the UK taxpayer out of pocket. .
We are determined to make the UK the best place in the world to do business. The expansion of powers to investigate directors of dissolved companies means that those who may previously have shirked their responsibilities will be held to account.