Investigating Directors of Dissolved Companies
In 2022, UK government expanded the Insolvency Service’s powers to investigate directors of dissolved companies. These reforms aimed to combat fraud, particularly misuse of Covid‑19 support loans.
by Peter Kelly A trusted insolvency advisor who helps directors navigate financial challenges with clarity, compassion, and practical solutions that protect both business and personal interests.
The 2022 legislation – The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act – extends those investigatory powers to directors of dissolved companies. If any misconduct is found, directors face sanctions including being disqualified as a company director for up to 15 years or, in the most serious cases, prosecution.
Key changes
Updated authority:
The Insolvency Service can now pursue directors even after a company has been dissolved.
Accountability:
Directors remain liable for misconduct such as avoiding creditor payments or misusing government loan schemes.
Penalties:
Investigations can lead to disqualification from directorship for up to 15 years, fines, and reputational damage. Keywords: dissolved company investigation, Insolvency Service powers, director disqualification.
Why reforms were introduced
During the pandemic, government support expanded rapidly. Some directors attempted to dissolve companies to escape repayment obligations, a practice known as phoenixism. Previously, dissolved entities escaped scrutiny. Now, misconduct can be investigated even after closure, ensuring creditors and taxpayers are protected.
What directors must do
- Recognise that dissolution no longer shields against investigation.
- Avoid using insolvency or dissolution to sidestep debts.
- Maintain accurate records and act in creditors’ best interests.
Seek professional advice before considering liquidation or dissolution. Keywords: director obligations, insolvency advice, creditor protection.
Key Takeaway
Directors should treat dissolution with caution. The Insolvency Service can investigate past conduct, enforce penalties, and hold directors personally accountable. Early professional guidance helps avoid costly mistakes and ensures compliance with insolvency law.
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