Directors who dissolve companies in order to avoid paying workers or pensions could now face hefty fines or be disqualified from running a business for the first time. The Government is to press ahead with new plans to safeguard workers, pensions and small suppliers when a company goes bust. Under the shake-up, bosses will face investigation if they try to escape paying a dissolved company’s debts to their own staff and creditors.
While the majority of UK companies are run in a responsible fashion, there are a minority of directors who deliberately dodge debts by dissolving companies then starting up a near identical business with a new name. This particular practice is known as ‘phoenixing’ or ‘bumping companies’.
Under the Government’s new powers, though, the Insolvency Service will be able to fine directors or even have them disqualified.
Business minister Kelly Tolhurst explained: “The UK is a great place to do business with some of the highest standards of corporate governance. While the majority of UK companies are run responsibly, some recent large-scale business failures have shown that a minority of directors are recklessly profiting from dissolved companies. This simply cannot continue. That’s why we’re upgrading our corporate governance to give new powers to authorities to investigate and hold responsible those directors who attempt to shy away from their responsibilities, help protect workers and small suppliers and ensure that the UK remains a great place in which to work, invest and transact business.”