David Murray and Louise Low, in our Dispute Resolution team, explain the The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act.
As a result of the Coronavirus pandemic and subsequent lockdowns, the UK Government offered financial support to businesses across the country, including providing Government-backed loans.
However, some directors have abused this support by receiving the loans and thereafter dissolving their companies before repayment. As Business Secretary Kwasi Kwarteng has said, this leaves the “British taxpayer out of pocket”. In addition, some directors have dissolved their companies to avoid paying staff and creditors.
Therefore, new legislation has been introduced to extend The Insolvency Service’s powers to investigate and disqualify directors who abuse the dissolution process. The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act received royal assent on 15 December 2021 and means that The Insolvency Service can now investigate directors of companies that have already been dissolved. Previously, the Service was only able to investigate directors of live companies that had entered a form of insolvency.
Directors who are found guilty of wrongdoing may be disqualified as a company director for up to 15 years or face prosecution. Further, they may be ordered to pay compensation to creditors that fell victim to their fraudulent behaviour.
It is hoped that the Act will mean dissolution is reserved for its intended purposes and that more creditors receive payment of liabilities owed to them.
If you would like further advice on this new legislation, partner David Murray, head of our Dispute Resolution team, can advise.
For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.
This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.
