New Powers to Investigate Directors

New powers are to be given to the Insolvency Service to investigate directors of companies that have been dissolved, closing a legal loophole and acting as a strong deterrent against misuse of the dissolution process.

Currently, the Insolvency Service has powers to investigate directors of live companies or those entering a form of insolvency. If wrongdoing or malpractice is found, directors can face sanctions including a ban of up to 15 years.

The process will no longer be able to be used as a method of fraudulently avoiding repayment of Government backed loans given to businesses to support them during the Coronavirus pandemic.

The change in law will also help prevent directors who set up near identical businesses following the dissolution, often leaving customers and other creditors, such as suppliers or HMRC, unpaid.

The new measures which are included in the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, had its first reading in the House of Commons earlier this month. The measures are retrospective and will enable the Insolvency Service to also tackle Directors who have inappropriately wound-up companies that have benefited from Bounce Back Loans.

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.”