Ministers are set to crack down on company directors seeking to dissolve their businesses to avoid repaying creditors in a bid to prevent the loophole being exploited to write off government-backed emergency COVID loans. The Insolvency Service will be given increased powers to investigate and sanction directors found to have abused the process.

The measures form part of a bill put before parliament and will also give the government agency retrospective powers. The crackdown also aims to prevent directors of dissolved companies from setting up a near-identical business. The government said the process would: “…no longer be able to be used as a method of fraudulently avoiding repayment of government-backed loans given to businesses to support them during the coronavirus pandemic.”

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