Tougher insolvency laws on their way

Plans for tougher measures against bosses who deliberately dissolve their firms to avoid paying off staff or meeting their pension commitments have been announced.  The measures aim to stop the practice of ‘phoenixing’ where a business goes bankrupt, walks away from its debts and responsibilities, and then relaunches under a different name.

The high-profile business collapses of BHS and Carillion left thousands of workers without jobs and it has also emerged there were big holes in their pension schemes.  Nevertheless, BHS directors continued to be highly paid.  Examples such as these, as well as ‘phoenix’ companies, have led to the Insolvency Service being given new powers under tougher legislation.  These include bigger fines and more disqualifications for ‘irresponsible directors’ if they dissolve a company to avoid paying bills.  Companies would also have to prove they can afford to pay salaries and pension payments if they are also paying dividends to investors.

We welcome tougher measures, but we are not convinced they go anywhere near far enough to stamp out this practice

 Hilary Hall, NHBF chief executive, said: “It’s so frustrating for reputable businesses to see unscrupulous ones getting away with letting their companies go bust, leaving a trail of debts behind them, and then just setting the same business up again under a slightly different name.  We welcome tougher measures, but we are not convinced they go anywhere near far enough to stamp out this practice.”