Insolvency regulator cracks down on ‘company bumpers’

The Government will do more to protect workers and crack down on directors who fail to protect the interests of employers and their pensions in insolvency, it has been revealed.
In a new announcement, the Insolvency Service said directors who have dissolved companies to avoid paying workers or pensions will become subject of the authorities for the first time.
The insolvency watchdog adds that directors could face “hefty fines” or “be disqualified from running a business” should they attempt to profit from dissolving a company.
The measures follow new research which suggests that some directors are “deliberately dodging” debts by dissolving companies then starting up a new identical business with a new name. This is known as “phoenixing” or “bumping companies”.
By doing this, said Business Minister Kelly Tolhurst, company directors are able to avoid paying staff and creditors.
“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.”
The announcement comes as part of a series of measures which the Government say will give businesses close to entering insolvency more time to rescue their company.

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