ICSM: “It’s about time!” New law to allow the Insolvency Service to ‘go after’ directors of phoenix companies and insolvent firms suspected of abusing Government loans and furlough payments
The passage of the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill through parliament this summer is slow and complex but its eventual passing will be welcomed by ICSM boss Ian Carrotte.
“It’s about time,” he said, “it’s a tightening of the law that is long over due as the phoenix phenomenon has been around for years and has got worse with he Covid-19 crisis. Going after directors who have cynically dumped debt, left staff unpaid and failed to pay suppliers but have lined their pockets and had the cheek to set up shop with an identical firm days after insolvency represents the unacceptable face of business. My main concern is that words and bills are one thing but action is needed to enforce the law and that means giving the Insolvency Service the resources and staff to do the job.”
Ian Carrotte of ICSM
The Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill is currently in the report stage in the House of Commons before its third reading and then a five stage passage in the House of Lords before its final reading and Royal Assent. It means it should be law later this year.
What does it mean?
The Insolvency Service will be given powers to investigate directors of companies that have been dissolved, closing a legal loophole and acting as a strong deterrent against the misuse of the dissolution process.
The process will no longer be able to be used as a method of fraudulently avoiding repayment of Government backed loans given to businesses to support them during the Coronavirus pandemic
Extension of the power to investigate also includes the relevant sanctions such as disqualification from acting as a company director for up to 15 years. These powers will be exercised by the Insolvency Service on behalf of the Business Secretary.
At present, the Insolvency Service has powers to investigate directors of live companies or those entering a form of insolvency. If wrongdoing or malpractice is found, directors can face sanctions including a ban of up to 15 years.
The measure will also help to prevent directors of dissolved companies from setting up a near identical business after the dissolution, often leaving customers and other creditors, such as suppliers or HMRC, unpaid.
The measures included in the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill are retrospective and will enable the Insolvency Service to also tackle Directors who have inappropriately wound-up companies that have benefited from Bounce Back Loans.
About ICSM Credit
ICSM Credit has more than four decades of experience as a credit intelligence group whose members gain inside information about firms in trouble allowing them to avoid bad debts and rogue traders. To join costs less than a tank of fuel - while at the moment there's a special free temporary membership offer during the Covid-19 crisis which gives access to free legal letters. ICSM also has an effective debt collecting service which has a global reach - ask for details from Paul.
For details about ICSM Credit call 0844 854 1850 or visit the website www.icsmcredit.com or email Ian at Ian.carrotte@icsmcredit.com on how to subscribe and to join the UK’s credit intelligence network to avoid bad debts and late payers. Follow ICSM Credit on FaceBook, Twitter and YouTube and Ian Carrotte on LinkedIn.
To keep up to date subscribe to the FREE ICSM Credit Newsletter to hear all the latest insolvency news and to see who has gone out of business click on the orange panel on the top left of the home page of the website www.icsmcredit.com or send an email to Ian.carrotte@icsmcredit.com
For details for the work of the journalist Harry Mottram visit www.harrymottram.co.uk