Key Facts

• Insolvency Service estimates misconduct or misuse in only 1% of company dissolutions annually.
• Around 500,000 companies are dissolved each year in the UK.
• Even at 1%, this could amount to approximately 5,000 cases with a risk to creditors up to £1 billion.
• The average loan amount for a dissolved company might be around £200,000.
• The bounce back loan fraud collaboration group involves attendees from the Cabinet Office; CIFAS; Treasury; BEIS; and NATIS.
• There could be around 2,000 cases of companies being dissolved to avoid paying back government loans.
• The Insolvency Service has been involved in disqualification of directors in about 1,000 cases over the last year.
• Christina Rees thanks Mr Pegge for his evidence.
• The Committee adjourns briefly as the next witness is not yet ready.
• The Chartered Institute of Credit Management contributed to a 2018 consultation supporting director disqualification measures.
• Up to 2,500 companies that received COVID-related loans may have been dissolved over the last year.
• The Bill aims to give the Insolvency Service powers to investigate cases where directors leave behind unpaid debts, acting as a deterrent and potentially restoring confidence in the creditor community.
• Current disqualification provisions have been effective since 1986.
• The three-year time limit for investigations into directors’ conduct has been in place for 35 years.
• Insolvency practitioners are required to report on director conduct in insolvent situations.
• Dr John Tribe is a senior lecturer in law at the University of Liverpool.
• The Bill extends public protection provisions under the Company Directors Disqualification Act 1986 to dissolved companies.
• The measures aim to maintain public confidence and protect against unfit directors.
• Dr Tribe is a senior lecturer in law at the University of Liverpool with expertise in insolvency law.
• Phoenixing refers to the abuse of limited liability companies, causing damage to creditors.
• There were approximately half a million company dissolutions per year over the past six years.
• The Public Accounts Committee projected a loss of between £16 billion and £27 billion from bounce back loans in late June 2021.
• The Insolvency Service prioritises egregious cases or those that send a public protection signal.
• The lack of efficacy between 1928 and 1982 was attributed to insufficient resourcing.
• Between £16 billion and £27 billion have potentially been lost due to director misconduct.
• There were approximately half a million dissolutions per year, with about 5,000 potentially problematic cases.
• The Insolvency Service currently deals with around 1,200 disqualification cases annually.
• The Bill deals with amendments to the Company Directors Disqualification Act 1986.
• Dr Tribe mentions a case of Creasey v. Breachwood Motors Ltd regarding group reconstruction and employment claims.
• The three-year time limit for enforcement powers is discussed.
• £16 billion to £27 billion projected shortfall from bounce back loan abuse.
• A disqualification order for 12 years was issued against Mr Khan and his Birmingham-based business due to fraudulent activity involving forged documents for a £50,000 loan.
• Glasgow-based companies have been wound up in the public interest because of bounce back loan abuse.
• The Insolvency Service conducted 33 restorations in 2019 before the bounce back loan issue and coronavirus pandemic.
• Each restoration involves court fees, process fees at Companies House, adding extra procedural layers.
• The legislation aims to clear out this extra layer of bureaucracy for a quicker public protection mechanism.