Insolvency Services granted new powers to pursue directors of dissolved Companies

[Lisa Thomas]

It's taken a while!

I'll be interested to see how their investigations develop. I will also be interested to see whether, as a result, any changes will be made to the ability to directors to dissolve their companies so easily going forward:

https://www.gov.uk/government/news/...081-9468-0bad706f0297&utm_content=immediately

 

[WaveJumper]

Thanks for heads up going to be very interesting then going forward:

"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"

They timed that just right then

 

[Ian J]

How will it work meaning who will appoint and pay for investigators

 

[Gavin Bates]

Thanks Lisa, just seen this and I think the Government has spotted the issue.

I have been speaking to a few of my banking contacts and it seems that they have been told to object to any strike off where a BBL or CBILS is in place and to investigate in the same way as we have, i.e. was the loan validly obtained and what where the funds used for.

Ian, I am assuming this will be the current government investigation team or the official receiver neither of which have the resources!

Regards

Gavin

 

[Newchodge]

Is this not just still a proposal that was announced in the Queen's speech?

 

[MarkOnline]

Is this not just still a proposal that was announced in the Queen's speech?

Yes, but its retrospective, payback time for the "cute" operator. Those who took out the loan lawfully and used it as intended will be fine.

 

[Newchodge]

Yes, but its retrospective, payback time for the "cute" operator. Those who took out the loan lawfully and used it as intended will be fine.

But only if it is actually passed into law!

 

[WaveJumper]

The bill had its first reading on the 12th May we are awaiting date of the seconding reading but have a feeling this is going to be sooner rather than latter

Just doubled checked this on gov site:
Second reading is the first opportunity for MPs to debate the main principles of the Bill.
It usually takes place no sooner than two weekends after first reading.

 

[Gavin Bates]

WaveJumper, many thanks for the update. I had found that it listed yesterday but didn't understand the process so that is useful.

Strangely though I can't actually find the details of the bill itself.

Overall I think it is clear that this will pass and in any event is retrospective. It is clear that Government will be pursuing its money in whatever way possible.

 

[Lisa Thomas]

Quick update:

https://bills.parliament.uk/Publications/41475/Documents/202/21011.pdf

 

[ChrisCallaghan]

@Lisa Thomas thanks for sharing! And as you say about time!

I have been speaking to a few of my banking contacts and it seems that they have been told to object to any strike off where a BBL or CBILS is in place and to investigate in the same way as we have, i.e. was the loan validly obtained and what where the funds used for.

@Gavin Bates it's what I've expected for some time but good to get some confirmation. Thanks also for sharing.

There are plenty of genuine indebted companies that go down the strike off/Sponge Bob route because they cannot afford voluntary liquidation or don't wish to wait forever for a creditor to take winding up action, but we also know there are many, many, directors who are serial offenders who seem to get away with multiple dissolutions without investigations. When I previously worked an accountancy practice some years ago, a client managed to somehow get 15+ of her companies dissolved in a 12 month period. Had any of these been liquidations I am confident she would have been served a lengthy directors ban.

If this is passed into law I'm intrigued how the Insolvency Service will identify which dissolved companies it wishes to investigate.

 

[MarkOnline]

But only if it is actually passed into law!

You think it wont be passed into law?
Im not a gambler but I suspect the government will manage to get this one through. The tax payer may give their support too I would imagine.

 

[Gavin Bates]

Many thanks for the share Lisa, greatly appreciated.

 

[Newchodge]

You think it wont be passed into law?
Im not a gambler but I suspect the government will manage to get this one through. The tax payer may give their support too I would imagine.

My comment was based on my assumption that this was a Queen's speech announcement. I hadn't realised it was an actual Bill which has had its first reading.

 

[WaveJumper]

Be interesting to see if there is a rush of insolvency's other the coming weeks I can't imagine this bill getting held up or bounced back between the Lords and Commons. Too much of our tax payers money at stake.

 

[ChrisCallaghan]

@WaveJumper I think it depends how commonly known this becomes. I think many wanting to avoid investigation will still attempt dissolution and hope to slip through the net. At least from the perspective of an IP firm, we can advise our clients that choosing dissolution over liquidation does not mean that they will avoid investigation.

 

[OldWelshGuy]

If the government had any sense then they could write an a simple algorithm that would interrogate available data and flag for manual review. Hell I could write it in a matter of days.

The government will not do this however as we are talking about the public sector here who will take an age and make it so complicated that it doesn't work (But employs a few more thousand staff and of course the new 'managers' needed to manage them

 

[UK Contractor Accountant]

previously worked an accountancy practice some years ago, a client managed to somehow get 15+ of her companies dissolved i

I think Mr Grant Bovey is on 20 + at the last count on companies house records.

 

[ChrisCallaghan]

I think Mr Grant Bovey is on 20 + at the last count on companies house records.

Thankfully never a client of mine!

 

[japancool]

Sanjeev Gupta is about to rack up a few.

 

[ville1401]

Disqualification from being a director for 15 years doesnt sound like much of a slap on the wrist for serial fraudsters. Might stop them repeating the process going forward but seems a bit tame.

 

[ChrisCallaghan]

It's not made clear but I suspect they will be able to bring financial claims against the director for things such as misuse of funds (i.e. how the BBLS & CBILS has been spent), misfeasance, overdrawn director loan accounts etc. I could be completely wrong but my guess is that the directors will face the same potential risks they would face if the company went into liquidation.

 

[WaveJumper]

Disqualification from being a director for 15 years doesnt sound like much of a slap on the wrist for serial fraudsters. Might stop them repeating the process going forward but seems a bit tame.

They will be taking away their Lamborghinis and slapping big fines on them ...... probably

 

[Mr D]

Thanks Lisa, just seen this and I think the Government has spotted the issue.

I have been speaking to a few of my banking contacts and it seems that they have been told to object to any strike off where a BBL or CBILS is in place and to investigate in the same way as we have, i.e. was the loan validly obtained and what where the funds used for.

Ian, I am assuming this will be the current government investigation team or the official receiver neither of which have the resources!

Regards

Gavin

Gavin, HMRC announced a team to investigate recently, new bods and new money it appears.
Whether they will focus on one area of covid fraud or multiple areas is open to question.
Could be they get the job of checking up on directors dropped on them.

Or just some of the more serious of the fraud cases from existing teams.

 

[Mr D]

Disqualification from being a director for 15 years doesnt sound like much of a slap on the wrist for serial fraudsters. Might stop them repeating the process going forward but seems a bit tame.

It will stop them openly being a director. Does not stop them running a business or from being self employed.

And there are people willing to agree to be a director in name only for someone else to do the work.

 

[zeus70]

This is nothing new, HMRC always had the power to investigate dissolved companies and did not need a new law. This is all PR, to use fear to make people conform they have always used fear

 

[zeus70]

people reading this forum should listen to all points carefully:

1. file ds01 only if you have stopped trading and cannot afford to appoint an insolvency practitioner
2. follow the spongebob plan and ensure creditors get informed of your action so they can object or appoint official reciever
3. stick to your guns, when debt is passed onto the debt collector

eventually ltd will be closed down. for those with bounce back loans, ensure BBL funds have been used for its intended purpose - make sure you right these down if anyone wants to know. for most people this will be expenses and salary....not to pay off any other loan etc (read up if unsure)

follow all these points, protects yourself, and there should not be any issues.


HMRC always uses fear to make people conform. Dont let this fear stop you from closing the company down even with outstanding debts and loans.

 

[ChrisCallaghan]

This is nothing new, HMRC always had the power to investigate dissolved companies and did not need a new law. This is all PR, to use fear to make people conform they have always used fear

But the Insolvency Service didn't. Now they will, and the reason why this is important is the it is through an IS investigation the rogue directors get banned and/or fined.

 

[John Hemming]

I have seen people with a history of dissolved and struck off companies where I think there is some form of tax fiddle going on and the companies trade, but get struck off before they have to submit accounts.

 

[Lisa Thomas]

This is nothing new, HMRC always had the power to investigate dissolved companies and did not need a new law. This is all PR, to use fear to make people conform they have always used fear

This is new. HMRC had powers to investigate HMRC fraud.

This is the Insolvency Service having power to investigate everything that falls under the wrongdoing or misconduct banner.

My understanding is they aim to start investigating companies where the BBL has not been repaid.

All directors that drew the BBL funds out personally and didn't pay the loan back to their company should be sweating...

 

[UK Contractor Accountant]

https://www.bbc.co.uk/news/av/uk-55895738

 

[WaveJumper]

Interesting times ahead me thinks, some people who think they have skipped under the HMRC radar could be getting a tap on the shoulder a year or eighteen months up the line

 

[Lisa Thomas]

Interesting times ahead me thinks, some people who think they have skipped under the HMRC radar could be getting a tap on the shoulder a year or eighteen months up the line

It is likely to be years longer than that...

 

[japancool]

But... but... but... I thought it was a grant! I've been missold!

 

[WaveJumper]

Big sigh lets not go there again

 

[ChrisCallaghan]

As some have already mentioned it may be years before the Insolvency Service actually catch up with directors of dissolved companies who have misused BBLs... and then when we do, no doubt there will be a flood of directors on here claiming that the this is 'unfair' and 'but wait, the BBL was not personally guaranteed!' .....

 

[ChrisCallaghan]

This is new. HMRC had powers to investigate HMRC fraud.

This is the Insolvency Service having power to investigate everything that falls under the wrongdoing or misconduct banner.

My understanding is they aim to start investigating companies where the BBL has not been repaid.

All directors that drew the BBL funds out personally and didn't pay the loan back to their company should be sweating...

Lisa, do you know if the IS will have powers of financial recovery under these new changes? The same way a liquidator would go after recovery of miss-spent BBLs? Or would they need to reinstate and wind up?

 

[UK Contractor Accountant]

and then when we do, no doubt there will be a flood of directors on here claiming that the this is 'unfair'

quite a few are arguing that dividends were not covered for the Furlough Scheme so they were forced into taking Bounce Back Loans to survive when they had to close up shop.

 

[ChrisCallaghan]

I'm no accountant but if a director wanted to pay themselves using the BBL, I know several accountant's who were advising there clients to pay themselves PAYE only to be on the safe side.

 

[Lisa Thomas]

Lisa, do you know if the IS will have powers of financial recovery under these new changes? The same way a liquidator would go after recovery of miss-spent BBLs? Or would they need to reinstate and wind up?

Interesting question, Chris. I had presumed they would have the same powers as liquidators have but it seems I was wrong as this is all I can find:

"If wrongdoing or malpractice is found, directors can face sanctions including a ban of up to 15 years."

I'm not sure what 'sanctions' they are referring to but it sounds to me like no financial repercussions....

I suppose they could possibly reinstate and liquidate and get a liquidator to pursue but I wonder how likely that is.