Rogue directors who dissolve their companies and avoid paying
liabilities to staff, creditors and the taxpayer can now be
disqualified from being a director.
The Insolvency Service has been granted new powers to tackle
unfit directors who dissolve companies to avoid paying their
liabilities.
The new legislation extends the Insolvency Service’s powers, on
behalf of the Business Secretary, to investigate and disqualify
company directors who abuse the company dissolution process.
The Rating (Coronavirus) and Directors Disqualification
(Dissolved Companies) Act will also help tackle directors
dissolving companies to avoid repaying Government backed loans
put in place to support businesses during the Coronavirus
pandemic.
Business Secretary 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 has powers to investigate directors of
companies that enter a form of insolvency, including
administration and liquidation. The Insolvency Service may also
be instructed to investigate live companies where there is
evidence of wrongdoing.
This Act extends those investigatory powers to directors of
dissolved companies and if misconduct is found, directors can
face sanctions including being disqualified as a company director
for up to 15 years or, in the most serious of cases, prosecution.
The Business Secretary will also be able to apply to the court
for an order to require a former director of a dissolved company,
who has been disqualified, to pay compensation to creditors who
have lost out due to their fraudulent behaviour.
The Act also delivers on the commitment to rule out
COVID-19-related changes as grounds for material change of
circumstances (MCC) business rate appeals. This is due to the
fact that market-wide economic changes to property values, such
as from COVID-19, can only be properly considered at general
rates revaluations.
To support this, the government is providing £1.5 billion in
business rates relief to sectors which have suffered most
economically over the pandemic and not been eligible for existing
support linked to business rates. Guidance published on 15
December 2021 will support local authorities to set up their
local schemes through which businesses will be able to access
relief.
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.
Notes to editors
The measures will be introduced under the Ratings
(Coronavirus) and Directors Disqualification (Dissolved
Companies) Act and the legislation will cover England,
Scotland, Wales and Northern Ireland. The Act received Royal
Assent on 15 December 2021 .
More information about director disqualification is available
on GOV.UK.
The Directors Disqualification Measure implements a policy first
announced in August 2018. The Government announced it would
implement when Parliamentary time allowed and the Bill was
introduced on 12 May in part to deliver on measures to combat
Bounce Back Loan fraud as announced in Budget 2021.
