Member Article

New legislation leaves rogue directors nowhere to hide

NEW government powers to investigate directors of companies that have been dissolved will leave rogue businessmen with nowhere to hide, a leading Sheffield financial expert has warned.

The Insolvency Service is being given fresh authority to investigate directors of companies that have been dissolved.

Deborah Lockwood, a director of Sheffield business turnaround and insolvency practice Graywoods, says this measure will close a legal loophole and also provide a strong deterrent against the misuse of the dissolution process.

In particular, she says, the process should stop directors fraudulently avoiding repayment of the Government backed loans that were given to businesses to support them during the Coronavirus pandemic.

And she says it should prevent the directors of dissolved companies from setting up a near identical businesses after the dissolution, allowing them to move forward at the expense of unpaid customers, creditors and HMRC.

“As businesses start to emerge from lockdown and hopefully begin looking to a brighter future, there’s absolutely no better time to crack down on people who abuse the system and leave a trail of unpaid debt in their wake,” she said.

“The extension of the power to investigate will also include some tough sanctions such as disqualification from acting as a company director for up to 15 years.

“It is becoming increasingly apparent that people are abusing the bounce back loan system that was created to help businesses weather the Covid-19 storm.

“There are directors who think that the dissolution process gives them chance to disappear under the radar and emerge the other side of the process debt free and ready to start afresh, regardless of the damage they have caused to other businesses.

“Too often we have seen serial directors set up a company for just 18 months or so then dissolve the business before too many questions about finances are asked.

“This new bill gives the insolvency service powers to investigate the actions of those directors and also give creditors the steps they need to restore businesses to the Companies Register and pursue them lawfully.

“For too long there have been people taking advantage of the system to operate a tax free existence and now, hopefully, this will stop - and that has to be to the benefit of the many traders who are working hard to keep afloat both legally and honestly.”

This was posted in Bdaily's Members' News section by John Highfield .