Insolvency Service New Powers

Insolvency Service to gain new powers to investigate dissolved company directors

Authored by Kelly Burton

Kelly Burton

View Profile
Approximate read time: 3 minutes

A bill is being voted on that will grant the Insolvency Service new powers to investigate directors of dissolved companies who have failed in their directorial duties.

What are these new powers?

Before these new powers come into force, the Insolvency Service can only investigate any potential wrongdoing if the director’s limited company is active. This restriction creates a loophole where directors can dissolve a company without being investigated, meaning any evidence of wrongdoing might slip through the net.

More on dissolving a company

Additionally, it’s hoped these new measures will reduce the practice in which directors dissolve one company, only to set up a near-identical one immediately afterwards.

What can happen to directors?

If directors are found to have misused the dissolution process and failed in their duties as director, they could face a number of sanctions. Those sanctions could include disqualification from acting as a director for up to 15 years.

Can companies with bounce back loans still be dissolved?

If a company has repaid its bounce back loan and is solvent, a dissolution can go ahead as normal. However, if the company has an outstanding balance on that loan or other debts, your creditors will likely object to the strike off. Before attempting to file for dissolution, you’re obliged to inform the company’s creditors and HMRC of your intentions, and you may receive an ‘Objection to Company Strike off Notice’.

Dissolving a company with a bounce back loan

When will these changes come into force?

While the government has stated it intends to grant the Insolvency Service these new powers, they are yet to specify a date when they will come into force.

Closing a company with debts

If you’re the director of an insolvent limited company and feel that closure would be your best option, you can close the company via a Creditors Voluntary Liquidation (CVL). A licensed insolvency practitioner (IP) takes control of the company, protecting it from further creditor action while closing it in an orderly manner. At the end of the liquidation, the debts die with the company, leaving the directors free to start a new company should they wish to. Directors’ conduct before the liquidation is investigated, and further action will be taken if evidence of wrongdoing is found, or the IP feels it necessary.

Speak to us for more info and to discuss your options.

More on Creditors Voluntary Liquidations


The Insolvency Service is to receive new powers to investigate directors of dissolved companies. It is hoped these incoming powers will catch directors dissolving their company who have failed in their duties as director. Before these rules, directors could attempt to dissolve a company without being investigated for any wrongdoing. Once these powers come into force, directors that are found to have misused a dissolution could face sanctions, including a ban on being a director for up to 15 years. Directors cannot strike off their company if it is insolvent. To close and settle the debt, they should speak to a licensed insolvency practitioner about liquidation.

Leave a comment