As we continue to see legislative changes being implemented following the first mentions of Covid-19 last year, it is important to keep on top of ongoing measures. In terms of recent legislation, the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill had its first reading in the House of Commons on 12 May 2021 and the Second Reading took place on 15 June 2021.
What is the Bill?
Section 1 of the Bill covers the impact of Covid-19 on determinations regarding certain non-domestic rating lists and is applicable in England and Wales only. Section 2, however, addresses the disqualification of directors of companies which are dissolved without becoming insolvent across the UK, including Scotland. If the Bill comes into force, this will be an important law.
Why does the bill matter?
If the Bill is given Royal Assent, it will be easier for the Government to investigate misconduct by directors of dissolved companies, as various provisions of the Company Directors Disqualification Act 1986 would be extended to apply to directors of dissolved companies. Previously, the court had the power to disqualify directors of companies which have at any time become insolvent due to their conduct, however the Bill extends this to cover directors of companies which have been dissolved without becoming insolvent.
As noted within a recent press release by the UK Government which helps to explain the rationale behind the Bill, the measures outlined are retrospective and will enable the Insolvency Service to tackle Directors who have inappropriately wound-up companies that have benefited from Bounce Back Loans.
What effect could the bill have on insolvent companies?
The extended scope of the Bill means that the risk of investigation for actions taken prior to choosing to dissolve a company is heightened.
Now, company directors will find it more difficult to fraudulently avoid repayment of business funding, including Government loans. Directors should be mindful of this where they have, for example, taken advantage of government loans during the Covid pandemic.
Reactions to the bill:
Commenting further on the Bill, Business Secretary Kwasi Kwarteng stated:
“As we build back better from the pandemic, we need to restore business confidence, but also people’s confidence in business – which is why we will not hesitate to disqualify directors who deliberately leave employees and the British taxpayer out of pocket.”
Further updates are awaited and we will be interested to hear more as the Bill works its way through Parliament.
As someone that works with a variety of commercial claims, I feel that this Bill should be passed to ensure that appropriate protections are in place to combat director misconduct. If the Bill is passed, this may assist Alba Claims clients and we may see an increase in actions concerning misfeasance and breaches of directors’ duties.
If you require assistance in relation to a matter concerning company directors’ duties, please get in touch.
