Rating (Coronavirus) and Director Disqualification (Dissolved Companies) Bill begins passage through Parliament

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The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill is now working its way through the legislative stages of approval having completed its First Reading in Parliament. If enacted, it will introduce a fundamental and important change to the liabilities of directors of dissolved companies by amending certain provisions of the Company Directors Disqualification Act 1986 (“The Act”). These include:

  • The extension of the remit of Section 6 of the Act to the disqualification of unfit directors of insolvent companies to also include former directors of such companies.
  • It will be the duty of the Court to make a disqualification order against any individual who was a director of an insolvent company, or was a former director of a company which was dissolved without becoming insolvent, and where their conduct in that role makes them unfit to manage a company.
  • The Act will also provide that any disqualification order by the Secretary of State against a former director of a dissolved company may not be made once a period of three years since the dissolution of the company has passed. A further amendment will permit the Secretary of State or official receiver to request information or documentation from any person concerning the conduct of a former director of a dissolved company.
  • Compensation claims can be brought in circumstances where the conduct of a former director of a dissolved company has led to creditors incurring losses.
  • Any conduct subject to these amendments can be investigated if it occurred in companies already dissolved, as well as that which occurs after the Bill has received Royal Assent.

This legislation is aimed at preventing the practice of directors dissolving companies in an attempt to avoid investigation and disqualification rather than placing them into an insolvency procedure, and it is important that directors, advisors and insolvency practitioners are aware of these provisions.

If you have any questions regarding this or any other corporate or insolvency related matter, please do not hesitate to contact a member of the team.