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Directors who dissolve firms to avoid staff pay-outs face being banned under new rules

2 min read

Company bosses who dissolve their firms in order to dodge paying staff money they are entitled to face being fined or disqualified from holding the position under new rules.


Ministers are set to hand the Insolvency Service the right to punish directors following recent high-profile collapses which hit staff and pension schemes, such as that of Carillion and BHS.

Under the rules, directors will face an investigation if they try to escape their debts through ‘phoenixing’ or ‘bumping companies’ - whereby they go on to set up a near identical business with a new name.

Proposals are being developed to train directors so that they are more aware of their legal duties.

Elsewhere struggling firms are to be given more time to rescue the business and save jobs through restructuring or by seeking fresh investment.

The body could also make companies prove to shareholders that they are able to pay salaries and pension payments if they are also paying dividends to investors.

Business Minister Kelly Tolhurst said of the plans, which are to be outlined further in the autumn: "The UK is a great place to do business with some of the highest standards of corporate governance.

"While the vast 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 can’t continue.

"That is why we are upgrading our corporate governance to give new powers to authorities to investigate and hold responsible directors who attempt to shy away from their responsibilities, help protect workers and small suppliers and ensure the UK remains a great place to work, invest and do business."

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