The government is proposing new legislation which aims to provide The Insolvency Service with more powers to investigate directors of companies that have been dissolved; therefore preventing directors from committing fraudulent acts without investigation.
Currently, The Insolvency Service only has powers to investigate live companies or companies that have formally entered the liquidation process. If directors have been found guilty of misconduct they can face a number of sanctions including a ban on being a director of any limited company for up to 15 years. Company dissolution is not defined as a formal liquidation process and therefore currently directors actions cannot be investigated.
Not only will this law close a legal loophole, it will also prevent these directors from setting up additional, similar companies and leaving suppliers including HMRC, unpaid. The provisions will be retrospective so will enable The Insolvency Service to tackle directors who have inappropriately dissolved their companies while fraudulently benefitting from bounce-back loans.
The proposed legislation will put in place stronger consequences for fraudulent directors and ensure all liquidation processes act in the very best interest of creditors, while promoting individuals and tax payers’ confidence.
If you need any help with any insolvency matter then please speak with one of our Insolvency Practitioners, Amanda Ireland or Alison Collier.