New powers for Insolvency Service – Directors take note!
Aisling Muldoon from our Restructuring & Insolvency Team discusses the recent Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act.
Company strike-off – no longer a killer punch!
Up until very recently, the Insolvency Service only had powers to investigate the conduct of company directors of insolvent companies. That meant if a company had simply been struck off the company register, the directors would not have been subject to any investigation on their conduct.
As a result, the affairs of many dissolved companies fell under the radar of investigations and examination and in cases where there was residual debt or unanswered questions, the issues were left outstanding and possibly “put down to experience” by dissatisfied creditors. Yes, the option has been there to apply to the High Court to have the company restored and then placed into liquidation – but for many creditors the effort and cost of this process meant that the company was left to die on the vine.
So what has changed?
Early last year, the UK government announced that it was planning a clampdown on this loophole and proposed guidelines were laid down. The above Act received Royal Assent on 15 December 2021 and now covers Northern Ireland, England, Scotland and Wales.
The legislation can be applied retrospectively, and the Insolvency Service now has the power to investigate companies dissolved prior to the legislation was announced. However, the Insolvency Service would have to lodge any applications to commence action within 3 years after the company had been dissolved.
This new legislation highlights the importance of Directors seeking early advice on the options available to their company and potential risk areas for Directors. It should also serve as a timely reminder that directors’ duties are codified in the Companies Act 2006, their duties are wide ranging, and a strike-off notice or a strike-off decision should not be taken lightly.
Interestingly Companies House has already updated its search criteria to include a facility to search by date companies were dissolved – the three-year clock is already ticking!
If you need advice on the options available to your company, or if your company has been struck off and needs restoring, contact firstname.lastname@example.org.
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Gildernew & Co. Ltd make every effort to ensure the accuracy of the information herein. However, no reliance should be placed on any of the above without seeking independent professional accountancy, legal and/or financial advice.
Posted on March 16, 2022