Approximately 1.5 million businesses have taken liberty of the Bounce Back Loan scheme, receiving interest-free loans of up to £50,000.
The scheme was intended to lessen the negative affects of the Coronavirus pandemic on small and medium-sized businesses across the UK.
Legally speaking, small businesses are only permitted to dissolve their company through voluntary liquidation or strike-off when it has not traded, has no assets and when creditors have been informed.
However, directors have been known to abuse the dissolution process by simply terminating their companies without putting them through an insolvency process. This is done as a means of avoiding liabilities and investigation.
As declared in the budget earlier this year, The government is highly cautious of potential fraud in respect to repaying emergency Coronavirus loans.
In a bid to combat this, an enhanced Insolvency service will be able to investigate small business owners suspected of deliberately winding up their businesses to avoid replaying their debts.
When such misconduct is identified, small business owners could lose the right to serve as directors for up to 15 years.
In a further attempt to close the insolvency loophole, directors are being prevented from setting up similar businesses after their companies are dissolved.
As business minister Kwasi Kwarteng told the Times, “rogue directors who exploited the legal loophole that allowed them to deliberately run their companies into the ground to avoid paying their staff, suppliers, taxes or taxpayer-backed loans will have to watch their backs because this new legislation is closing that door firmly and permanently.”
If your business is expeirnceing financial difficulties or cash flow problems, do not hesitate to get in contact with us and we can look at strategies to combat this.