Crackdown on rogue directors who dissolve companies to avoid paying debts

The Government has launched a crackdown on bosses who dissolve their companies to avoid paying their liabilities, with rogue directors facing disqualification for up to 15 years or even prosecution.

The Insolvency Service has been granted new powers, on behalf of the Business Secretary, to investigate and disqualify company directors who abuse the company dissolution process, and leave many SMEs struggling with unpaid bills.

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 pandemic.

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.

As part of this new legislative power, directors could now also have to pay compensation to creditors who have lost out due to their fraudulent behaviour.

Commenting on the move, Business Secretary Kwasi Kwarteng 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 and may also be instructed to investigate live companies where there is evidence of wrongdoing.

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.

In addition, the Government says it is providing £1.5bn in business rates relief to sectors hit hardest by the pandemic, and which have not been eligible for existing support linked to business rates.

This month it provided guidance to support local authorities to set up their local schemes through which businesses will be able to access relief.

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