The Insolvency Service has been granted new powers to tackle unfit directors who dissolve companies to avoid paying their liabilities.

The new legislation extends the Insolvency Service’s powers, on behalf of the Business Secretary, to investigate and disqualify company directors who abuse the company dissolution process.

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 Coronavirus pandemic.

The Insolvency Service has powers to investigate directors of companies that enter a form of insolvency, including administration and liquidation. The Insolvency Service may also be instructed to investigate live companies where there is evidence of wrongdoing.

The Act extends those investigatory powers to directors of dissolved companies and 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.

The Business Secretary will also be able to apply to the court for an order to require a former director of a dissolved company, who has been disqualified, to pay compensation to creditors who have lost out due to their fraudulent behaviour.

Source: New feed