Director Disqualification Update – January 2022: New Year, New Laws
On 15 December 2021, the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 received Royal Assent and serves as an interesting development within the director disqualification legal regime.
You may have read our previous update on this in May 2021 Director Disqualification Update after the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill had its first reading in the House of Commons on 12 May 2021.
This new piece of legislation will be a useful tool for the Insolvency Service as it extends their powers to investigate and disqualify company directors of dissolved companies. This is mainly to target directors who seek to avoid repaying liabilities by simply dissolving their companies.
In particular, such conduct has become increasingly common as many directors seek to evade repayment of COVID-19 government bounce back loans. Read our update about this here Director Disqualification and Coronavirus Bounce Back Loans.
Where a director is found to have engaged in misconduct which makes him unfit to be a director, he could face disqualification for up to 15 years.
In addition, under this new legislation, compensation orders can now be applied for against a disqualified director of a dissolved company. This means that a disqualified director could be ordered to pay compensation to those creditors who have suffered prejudice as a result of his misconduct.