New legislation has been enacted to make it easier to investigate and prosecute directors.
The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act has just been passed into law which is principally designed to stop directors dissolving companies to avoid investigation into their conduct.
There was a 205% increase in the number of directors being prosecuted for fraud as a result of investigations by the Insolvency Service in 2021.
They are especially looking at companies that have taken out Bounce Back Loans (BBL) and Coronavirus Business Interruption Loans (CBILS)
If you are struggling to pay the loans and the business isn’t viable then you must liquidate the company. Click on this this link to download our 2022 experts guide to liquidating a company.
If you are dissolving your company, ensure there are minimal debts (ie less than £2000) and if you want all the templates and letters then you can get them from our site www.dissolvemycompany.co.uk
What other circumstances might lead to a director be investigated?
In any insolvency event such as liquidation or administration the insolvency practitioner has a duty to investigate the actions of the directors on behalf of the creditors. Understandibly the creditors need to know what caused the failure and if the directors were responsible. Yes the directors can be responsible but that does not mean that they will face any sanction unless they were involved in wrong doing or were grossly incompetent. Directors of companies need to take risks to succeed hence the limited liability of a company.
Possible breaches by Directors
- Failure to submit annual accounts and/or returns to Companies House on time
- Excessive salaries or drawings when the company was plainly insolvent
- Trading on when he or she knew the company was irreversibly insolvent (trading whilst knowingly insolvent)
- Continuing to take credit when there was "no reasonable prospect" of creditors being paid
- Misrepresentation of the facts about the company (in order to apply for Bounce Back Loans for instance)
- Applying for Furlough on behalf of employees whilst they were still working.
- Failure to respond or comply with a liquidator's requests.
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Categories: Implications for Directors, Bounce Back Loans FAQ