The Insolvency Service is to be given powers to investigate directors of companies that have been dissolved.
A dissolution of a company can be actioned by Companies House or by the directors. Each has a detailed, laid down procedure and, once dissolved, the company effectively ceases to exist.
This process has been misused by some directors historically to avoid paying company debts. Huge amounts of Government backed loans have now been made to companies to support them through the pandemic and these new rules will provide a strong deterrent against the directors of those companies simply dissolving their companies and writing off the loans.
Powers will include bringing action against a director to disqualify him from acting as a director for up to 15 years.
As the rules stand, the Insolvency Service only gets involved with companies that have entered a formal insolvency procedure.
The measures will also prevent directors of dissolved companies from setting up a near identical business after the dissolution, often leaving customers and creditors unpaid.
Meanwhile, the world carries on! The UK economy appears to be recovering nicely despite the pandemic and Brexit.
But there will be changes and not all business models will survive. Directors need to be realistic about the future of their companies and what they can and can’t do.
Do you have any clients that could do with some insolvency expertise and guidance? I’m always pleased to have a chat or meeting, without charge, of course. Call me on my mobile 077869 65009 or email me – tim.corfield@griffinandking.co.uk
