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https://www.thetimes.co.uk/article/...c?shareToken=3b2987339578c8b99bde20340610f377
Ban for directors who abuse insolvency
James Hurley, Enterprise Editor
Thursday May 13 2021, 12.01am, The Times
A loophole that allowed rogue directors to escape scrutiny by dissolving their companies is to be closed, the government has said.
The Insolvency Service will be given powers to investigate directors of companies that have been quietly struck from the corporate register amid concerns over fraudulent evasion of liabilities linked to emergency Covid-19 loans.
The service currently only has powers to investigate directors of live companies or those entering a form of insolvency. Directors can face sanctions including a ban of up to 15 years where wrongdoing or malpractice is found.
Dissolution via strike-off or voluntary liquidation is only supposed to be used without a prior insolvency and only when a company no longer has any assets, has not been trading and where creditors have been informed.
However, the dissolution process is sometimes abused by directors who simply wind up their companies without putting them through an insolvency in order to drop liabilities and escape investigation.
The government has said it will act against the misuse of the system by allowing directors of dissolved companies to be investigated. The measures can be applied retrospectively, allowing the Insolvency Service to tackle directors who have inappropriately wound up companies that have benefited from emergency state financial support such as bounce-back loans.
The move is also intended to 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 or HMRC, unpaid.
However, there are likely to be questions over whether the Insolvency Service has sufficient resources to enforce the new rules.
Kwasi Kwarteng, the business secretary, said a few unscrupulous directors could not be allowed to “abuse the support” put in place.
“Rogue directors who exploited the legal loophole that allowed them to deliberately run their companies into the ground to avoid paying their staff, suppliers, taxes or taxpayer-backed loans will have to watch their backs, because this new legislation is closing that door firmly and permanently,” he said.
“These new powers not only strengthen our ability to investigate but, if we find evidence of misconduct, we can seek to disqualify those rogue directors and remove them from the corporate arena for significant periods.”
Ban for directors who abuse insolvency
James Hurley, Enterprise Editor
Thursday May 13 2021, 12.01am, The Times
A loophole that allowed rogue directors to escape scrutiny by dissolving their companies is to be closed, the government has said.
The Insolvency Service will be given powers to investigate directors of companies that have been quietly struck from the corporate register amid concerns over fraudulent evasion of liabilities linked to emergency Covid-19 loans.
The service currently only has powers to investigate directors of live companies or those entering a form of insolvency. Directors can face sanctions including a ban of up to 15 years where wrongdoing or malpractice is found.
Dissolution via strike-off or voluntary liquidation is only supposed to be used without a prior insolvency and only when a company no longer has any assets, has not been trading and where creditors have been informed.
However, the dissolution process is sometimes abused by directors who simply wind up their companies without putting them through an insolvency in order to drop liabilities and escape investigation.
The government has said it will act against the misuse of the system by allowing directors of dissolved companies to be investigated. The measures can be applied retrospectively, allowing the Insolvency Service to tackle directors who have inappropriately wound up companies that have benefited from emergency state financial support such as bounce-back loans.
The move is also intended to 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 or HMRC, unpaid.
However, there are likely to be questions over whether the Insolvency Service has sufficient resources to enforce the new rules.
Kwasi Kwarteng, the business secretary, said a few unscrupulous directors could not be allowed to “abuse the support” put in place.
“Rogue directors who exploited the legal loophole that allowed them to deliberately run their companies into the ground to avoid paying their staff, suppliers, taxes or taxpayer-backed loans will have to watch their backs, because this new legislation is closing that door firmly and permanently,” he said.
“These new powers not only strengthen our ability to investigate but, if we find evidence of misconduct, we can seek to disqualify those rogue directors and remove them from the corporate arena for significant periods.”
