Insolvency Service given new powers to tackle Directors

Insolvency Service given new powers to tackle Directors. Insolvency sector set to see new regulator. The Government can afford to support Business through Omicron. Hospitality wants clarity on the rules. SMEs priced out of taking on EU staff.

Insolvency Service given new powers to tackle Directors

The Insolvency Service has been granted new powers to tackle these dodgy directors who place their firm in administration to avoid paying staff, suppliers, contractors and the HMRC.

The new legislation extends the Insolvency Service’s powers to investigate and disqualify company directors who abuse the company dissolution system. If the Insolvency Service find misconduct , directors can face sanctions including being disqualified as a company director for up to 15 years or, in the most serious of cases, prosecution. The Business Secretary will also be able to apply to the court for an order to require a former director of a dissolved company, who has been disqualified, to pay compensation to creditors that have lost out due to their fraudulent behaviour.

The Insolvency Service will also be able to examine companies yet to enter formal insolvency where there is evidence of wrongdoing.

The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act will also help tackle directors dissolving companies to avoid repaying Government-backed loans taken out during the Coronavirus pandemic.

Business Secretary Kwasi Kwarteng commented “These new powers will curb those rogue directors who seek to avoid paying back their debts, including government loans provided to support businesses and save jobs. Government is committed to tackle those who seek to leave the British taxpayer out of pocket by abusing the covid financial support that has been so vital to businesses.”

Stephen Pegge, Managing Director of UK Finance, added “The ability to dissolve a company when necessary is a right reserved in legitimate circumstances where there are no outstanding creditors, however, it can be open to abuse. The banking and finance industry therefore supports this legislation which will provide much needed powers to the Insolvency Service to help hold rogue directors to account by providing additional deterrents and easier enforcement of the rules.”

The Credit Protection believes these powers are long overdue and we have been calling for powers to stop rogue directors from putting their businesses into insolvency and transferring assets cheaply into a new phoenix company, leaving creditors high and dry. The practice will no doubt continue but hopefully some rogues will be deterred.

The shake-up of the insolvency industry could also deliver an independent watchdog, with Government proposals set to hand an independent watchdog powers to seek compensation for victims of malpractice.

Currently, insolvency practitioners are self-regulated by four groups, including the ICAEW and the Insolvency Practitioners Association. Under the mooted reform, the membership bodies will be replaced with a single independent regulator that would sit within the Insolvency Service. Business Minister Lord Callanan said the proposals would “deliver greater transparency, accountability and protection for creditors, investors and consumers.”

Under the current system, membership bodies can fine insolvency practitioners but for a victim to receive compensation they tend to have to pursue court proceedings. The new system being proposed will allow compensation to be paid for victims of misconduct or error by an insolvency practitioner or firm.

Duncan Wiggetts, of the ICAEW said: “The biggest problem with the current framework is not the identity of the enforcing body but the regulatory framework itself.” He added: “In our view, the creation of a single regulator is both unnecessary and potentially damaging to the UK’s insolvency and restructuring profession.”

Colin Haig, president of insolvency and restructuring trade body R3, said that the Government would need to set out in detail “how it would ensure the genuine independence” of the proposed regulator.

The Institute for Fiscal Studies (IFS) has said that the Government can afford to support struggling businesses through the current lockdown by stealth prompted by Omicron.

Chancellor Rishi Sunak can access the cash needed to help struggling businesses hit by Omicron despite continued high public borrowing.

IFS director Paul Johnson told the BBC that although interest rates were going up, borrowing was still “very cheap”. Current figures show that government borrowing is falling by the month.
The gap between its spending and tax income stood at £17.4bn in November, £4.9bn down on a year earlier. Paul Johnson said the chancellor would be able to afford to meet demands from pubs, restaurants and nightclubs for financial support. But he admitted it would be “very hard indeed” to provide targeted support to those who needed it most, given that city centres were harder hit than other areas. He added added that inflation fears would mean the chancellot would be worried about “throwing more billions into the economy at this stage”.

Carys Roberts, executive director of the Institute for Public Policy Research, says that while economic commentators and investors are focused on inflation and the Bank of England’s decision to raise interest rates to 0.25%, “the biggest macroeconomic questions facing the UK … are all up to the Chancellor.” She highlights the challenges the hospitality sector faces as the Omicron coronavirus variant hits trade, and details measures Rishi Sunak could take to stop companies collapsing and restore business confidence. Among these, Ms Roberts says the Chancellor should reinstate a version of the furlough scheme, as well as payments to the self-employed. Saying the UK faces a choice between a smaller, low-productivity economy and investing in a stronger recovery, with good jobs and support for people to take them, she comments: “An astute politician would take the latter path.”

Hospitality and entertainment businesses are calling for clarity from the government on whether to expect further Covid restrictions in England in the coming days. The PM did not announce any new measures yesterday, but did say data was being reviewed “hour by hour”. The chancellor met business leaders who want financial support last night, according to minister Stephen Barclay
He added the government would “say more” about these discussions later and also urged people to have a “cautious” Christmas.

SMEs priced out of taking on EU staff
Research from law firm Bates Wells suggests that SMEs are being put off taking on EU staff post-Brexit because of huge visa sponsorship costs. Since the end of the Brexit transition period last year UK companies have been required to take on sponsorship costs for visa applications for EU employees. Chetal Patel, an immigration partner at Bates Wells, said: “The post-Brexit immigration regime is a huge additional cost burden for businesses, effectively amounting to a tax on skills. For many SMEs, the cost is simply prohibitive, meaning they are losing out in the race for global talent.” She calls on ministers to cut the cost of sponsoring skilled workers.

Total value of UK property hits £9.5trn
Analysis by Zoopla shows that the value of British housing stock has hit £9.5trn. The research shows that the average house has now gained around £16,000 in value over the last 12 months, with 5m homes seeing their value increase by more than £35,000. Zoopla’s data also shows that prices were up 7.1% in November, taking the average to £240,900. Zoopla says the surge in prices has been driven by a boom in movers and a shortfall in supply, with demand up 16% year-on-year in November while stock declined 9.5%. Grainne Gilmore, head of research at Zoopla, noted that 2021 has been a record year for the market, with the stamp duty holiday playing a part in delivering the highest number of sales since before the financial crisis, with 1.5m transactions. She added: “After a busy start to 2022, the market will start to move back to pre-pandemic conditions,” but the imbalance between supply and demand “will not fully unwind”. Zoopla expects price growth of 3% next year.

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