Royal assent has been given to the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 (“the Act”), extending the Insolvency Service’s powers to investigate directors that have dissolved their companies to assess whether disqualification proceedings should be brought against them.
Previously, the Insolvency Service were only be permitted to investigate former directors if the Company had gone through a formal insolvency process (liquidation or administration) and following the receipt of a “conduct report” by the Liquidator or Administrator of that company.
The new legislation changes section six of the Company Directors Disqualification Act 1986, giving the Insolvency Service the power to commence disqualification proceedings if the conduct of the former director of said company “(either taken alone or taken together with his conduct as a director of one or more other companies or overseas companies) makes him unfit to be concerned in the management of a company”.
A director who is found to be “unfit” can be disqualified for a period of between two and fifteen years. Additionally, the court can make a compensation order if the director is subject to a disqualification order or undertaking and their conduct has caused a quantifiable loss to one or more creditors of a company.
For full details about disqualification proceedings, disqualification undertakings and compensation orders, please click here.