Directors who dissolve companies to avoid paying their liabilities will be targeted by new government powers  meaning rogue directors may be required to pay compensation to creditors.

The new legislation extends the Insolvency Service’s powers 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.

Business Secretary Kwasi Kwarteng said: “These new powers will curb those rogue directors who seek to avoid paying back their debts, including government loans provided to support businesses and save jobs.”

The Insolvency Service already has powers to investigate directors of companies that enter a form of insolvency, including administration
and liquidation.

It may also be instructed to investigate live companies where there is evidence of wrongdoing.

This 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.

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