Companies: Insolvency
The question
To ask the Secretary of State for Business and Trade, whether he plans to review company insolvency rules that permit company directors to retain significant personal assets following corporate bankruptcy.
Answered by Blair McDougall
Companies are separate legal entities and directors only become liable for company debts under limited circumstances. This protection encourages entrepreneurship and is central to the health of the UK economy.
Most companies do not become insolvent due to any wrongdoing by the company directors. However, when there is evidence of misconduct, the Insolvency Service may take action to disqualify a director, and where the disqualified director’s conduct has caused a quantifiable loss, can apply to the court for a compensation order to recover personal assets for the benefit of creditors.
There are no plans to review this legislation.
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