A quick practice update from the UK
By Maria Pombo, Director, BeRescued Business Consulting Ltd
Early this year I have seen 2 important legislative changes in the UK that aim to tackle economic crime and investigate Directors of dissolved companies. I believe these changes are important from a Turnaround and Restructuring practices point of view.
Firstly, the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 makes, with effect from 15 February 2022, important changes to the Company Directors Disqualification Act 1986. As presently drafted, the 1986 Act provides that the court will, in the circumstances set out in that Act, make a disqualification order against directors of companies “which has at any time become insolvent”: current section 6(1)(a). That power is, by the 2021 Act, extended such that the court has an identical power in relation to persons who have been directors of “a company which has at any time been dissolved without becoming insolvent”: new section 6(1)(a)(ii). Consequential amendments are made to the rest of the 1986 Act. Importantly, by s 2(14) of the 2021 Act the changes apply to the conduct of directors even if that conduct occurred before the enactment of the 2021 Act, and even if the company was dissolved before that enactment. (Source: The Three Stone Triannual Review Issue 5)
The article below “Court in the act” by barrister Professor Mark Watson-Gandy provides a good summary of newly legislated powers to investigate directors of dissolved companies.
CTPs practicing as Interim Directors or CRO whose appointments are registered with Companies House, need to be aware of these changes when accepting appointments and make sure the appointments carry additional Directors Liability insurance protection or equivalent that is valid for at least 6 years post ending the appointment and/or assignment.
Secondly, The new Economic Crime (Transparency and Enforcement) Act received Royal Assent on 15 March 2022.
Under the Act, a new Register of Overseas Entities will be created (by UK Companies House), requiring those behind foreign companies which own UK property/real estate to reveal the identities of the beneficial owner(s). This is believed to be a valuable tool for UK law enforcement agencies in investigating suspicious wealth while ensuring legitimate businesses continue to see the UK as an investment hub.
This is an important update to bear in mind for restructuring workouts and conducting due diligence. More information and documents related to the Economic Crime (Transparency and Enforcement) Bill 2022 can be found in these links New measures to tackle corrupt elites and dirty money become law - GOV.UK (www.gov.uk), Fact sheet: The Register of Overseas Entities (web accessible) - GOV.UK (www.gov.uk) and Economic Crime (Transparency and Enforcement) Bill 2022: overarching documents - GOV.UK (www.gov.uk)
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