A business no longer has to be in formal insolvency before the Insolvency Service can investigate directors’ abusing their powers over Covid loans.

Since December 2021 the service has been given powers to crack down on company directors who dissolve their firms to avoid making repayments on government backed loans.

These powers are retrospective to allow conduct that took place before the law comes into force to be investigated.

So far the service has banned three individuals from acting as company directors, for dissolving their companies to avoid paying back Covid support loans.

Directors can be banned for up to 15 years under the new powers.

Last year, before the new powers were granted the service successfully petitioned the Courts to wind up five limited companies that have been involved in abusing government loans, introduced to help businesses during the pandemic.

Directors should be aware of their legal obligations to run their businesses according to the various laws and obligations outlined in law.

Directors’ duties in an insolvency are included in various Acts, including, but not limited to the Insolvency Acts 1986 and 2000, the Enterprise Act 2002 and the Company Directors’ Disqualification Act 1986.

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