New powers to tackle unfit directors of dissolved companies announced
Under a new bill “Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill”, the Insolvency Service will have retrospective powers to investigate Directors who have abused the Government support Schemes.
The Government is seeking to close a number of legal loopholes that have existed that previously allowed unscrupulous directors to dissolve companies in order to avoid the repayment of Government-backed loans. These new powers vested in the Insolvency Service will act as a deterrent against the misuse of the dissolution process.
The Insolvency Service already has a task force in place making enquiries into numerous cases of fraud around both the furlough scheme and the government grants, some of which have been highlighted in the media and resulted in a number of successful prosecutions.
The Insolvency Services powers enable them to disqualify the worst offenders for a period of up to 15 years.
The measures will also prevent directors of dissolved companies from commencing in business with an identical business after dissolution. Business Secretary Kwasi Kwarteng has 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.”
As Insolvency Practitioners, we are obliged to monitor the potential misuse of financial grants taken by companies during the pandemic. Obviously, directors and business owners have little to fear if the funds have been applied for and utilised in accordance with legislation, even if it later transpires that the loans have not been sufficient to enable the company to continue trading and now requires our help and assistance.
If directors haven’t acted in the best interests of the company, its employees, creditors and stakeholders,they can expect to be made accountable under these new powers.
Directors, therefore, should think very carefully about the decisions they take regarding closing a Company in these circumstances and should take advice.
The Partners and Senior Managers at Poppleton & Appleby are more than happy to talk to you or your clients in confidence to clarify any matters that may be of concern.
If you need to speak to any of the team concerning this new bill, get in touch today.