The ‘Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill’ will provide the Insolvency Service with new powers to investigate the directors of companies that have been dissolved to avoid the repayment of loans. The aim is to prevent directors from dissolving their companies to avoid creditors and acts as a deterrent against the misuse of the dissolution process.
Extension of the power to investigate includes the relevant sanctions, such as disqualification from acting as a company director for up to 15 years. The measures put in place will also help prevent directors of dissolved companies from ‘phoenixing’, as in setting up near identical business after the dissolution of their existing company.
The measures included in the Bill are retrospective to enable the Insolvency Service to also tackle Directors who have inappropriately wound-up companies that have benefited from Bounce Bank Loans.
Business Secretary Kwasi Kwarteng said “As we build back better from the pandemic, we need to restore business confidence, but also people’s confidence in business – which is why we will not hesitate to disqualify directors who deliberately leave employees and the British taxpayer out of pocket.”
This Bill also delivers on the commitment to rule out COVID-19 related 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.
Compensation Orders were introduced in 2015, to hold directors financially accountable for the consequences of their own unfit conduct. These can be sought by the Insolvency Service through the courts following insolvency proceedings, if the director finds themselves subject to a disqualification order or undertaking and their conduct has caused a loss to creditors of the insolvent company.
Although Compensation Orders are rarely employed, there is potential scope for these to be used alongside the new investigatory powers and sanctions within ‘Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill’ to recover losses from the misuse of the Covid support schemes.
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Our highly experienced Banking and Finance Litigation Team can assist with any insolvency related claims.
We are happy to have an initial call with you and discuss how we may be able to help.
If you would like to discuss any of the above or would like our help, please contact Danielle Elmy-Liddiard on 0330 460 6096 or firstname.lastname@example.org, or the Head of Banking & Finance Litigation at Jamieson Alexander Anastasia Ttofis on 0330 460 6090 or email@example.com