New legislation targeting company directors who dissolve their business and leave staff and taxpayers out of pocket

On 12th May 2021, the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill was published. When the Bill receives Royal Assent it will amend various sections of the Company Directors Disqualification Act 1986.

The Insolvency Service will be given the power to investigate directors of companies that have been dissolved.

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.

At present, the Insolvency Service has powers to investigate directors of live companies or those entering a form of insolvency. Extension of the power to investigate also includes that if wrongdoing or malpractice is found, directors can face sanctions including a disqualification from acting as company director for up to 15 years.

The measure will also help to prevent directors of dissolved companies from setting up a near identical business after the dissolution, often leaving customers and other creditors, such as suppliers and HMRC, unpaid.

The measures included in the Bill are retrospective and will enable the Insolvency Service to also tackle directors who have inappropriately wound-up companies that have benefitted from Bounce Back Loans.

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