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Volume 504: debated on Thursday 21 January 2010

To ask the Minister of State, Department for Business, Innovation and Skills what recent steps his Department has taken to ensure that companies entering liquidation are not able to reform under a different name in order to avoid liabilities. (312551)

There is nothing in law to prevent a director of a company that has failed from forming a new company to carry on a business similar to, or even identical to, that of the failed company—providing he or she has not been disqualified from acting in the management of a limited company or subject to some other form of legal restriction such as personal bankruptcy. Directors involved in a liquidated company cannot usually be involved in the management of a new company which is known by the same, or a substantially similar, name. This has been the legal position for many years and there are no plans to change it.

Failure does not necessarily imply misconduct on the part of directors. Action can be taken against directors of failed companies to disqualify them from acting in the management of a company if the Secretary of State considers them to be unfit. They can also be prosecuted or ordered by the court to make a personal contribution towards the assets of the failed company in appropriate circumstances.

There is a robust enforcement regime in place. In the year 2008-09 an average of around five directors were disqualified every working day. In addition, and again on average, one individual was sentenced every working day having been convicted of offences following prosecutions brought by my Department as a result of referrals from the Insolvency Service.