Insolvency Service’s powers to be strengthened

Insolvency Service’s powers to be strengthened



ICSM has welcomed plans by the Government to impose fines on company bosses who dissolve firms in order to avoid paying redundancy cash to staff, fulfilling pension commitments and paying bills. Ministers are looking at ways to toughen the laws which currently allow firms to close down, and then reopen under a new name having dumped their liabilities to staff and suppliers.

The plans are to be outlined by the Department for Business, Energy and Industrial Strategy (BEIS) who said that reforms were needed to stop, "a minority of directors who deliberately dodge debts by dissolving a company then starting up a near-identical business, with a new name".

The high profile collapse of Toys R Us UK or British Home Stores, the demise of Carillion and the recent problems of House of Fraser have been cited by many in business as cases where the staff, suppliers and pension pots were left in limbo. Despite this hundreds of irresponsible directors are struck off and disqualified every year although some find their way back into positions of power.

The BBC reported that the Investment Association will be asked to investigate to see if more can be done to ensure companies give their shareholders an annual vote on dividends report. And the Government's proposals also want to make sure company directors spell out to investors how it can afford to pay out dividends alongside commitments to salaries, pension contributions and capital investment costs.

These and other measures will be set out in further detail in the autumn say the BEIS. ICSM has raised concerns over such practices such as pre-packs which many people feel have been abused as they can be little more than a way of a firm acquiring an ailing company as a rock bottom price without any of the liabilities. Labour and the TUC have already called for the proposals to be much tougher with heavy fines for directors and more cash for the Insolvency Service to tighten controls on rogue traders.

Ian Carrott of ICSM said: “After years of a lack of policing of unacceptable business practices it appears the political climate is changing with both main parties looking to crack down on bad practices.”

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