Limited companies and their debts

Limited companies can no longer run up debts and close without investigations then use the same assets to start a new business. These companies are called ‘Phoenix Companies’. ‘The phoenix is an immortal bird associated with Greek mythology that regenerates or is born again.’ (Wikipedia).

There is new legislation ‘the Ratings (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill’, (Received Royal Assent 15.12.2021). Directors cannot walk away from limited companies and responsibilities to creditors and staff. If the company received a government backed loan in respect to lockdown due to Covid restrictions the new law will apply. It closes the dissolution loophole and prevents directors avoiding repayment of government-backed loans during the pandemic and other creditors.

A dissolved company triggers the Insolvency Service to continue to investigate the company directors’ conduct imposing penalties and sanctions against all directors in respect to personal liability for debts and disqualification from being a director.

Links to government web sites for your information:

https://www.legislation.gov.uk/ukpga/2021/34/contents/enacted
https://www.gov.uk/government/news/crackdown-on-directors-who-dissolve-companies-to-evade-debts

If you have any queries relating to limited companies and their debts, please contact Sioban Calcott on 01926 491181 or email SiobanC@moore-tibbits.co.uk.