• Fri. Feb 23rd, 2024

North East Connected

Hopping Across The North East From Hub To Hub

Company Records Changes Could Be ‘Clean Slate’ For Dodgy Directors

That’s the response of Neil Harrold, chair of insolvency trade body R3 in the North East and a partner with Hay & Kilner Solicitors, to proposals that would see Companies House erase their records of closed businesses after six years, as opposed to the 20 years for which they’re currently held.

Companies House has stated that the rule change “is being considered following a number of complaints made by members of the public who believe that retaining, and making publicly available, information relating to long-dissolved companies is inconsistent with data protection law.”

But Neil Harrold believes such a move would be detrimental to insolvency practitioners’ fraud investigations, hindering their efforts to detect suspected fraudulent behaviour by company directors and potentially impacting on the returns they can secure for creditors of defunct firms.

Neil Harrold says: “It’s not uncommon to discover directors that are involved in several companies which have gone out of business, and deleting records after the short period of time that is being proposed would destroy evidence, hide past director behaviour and effectively give fraudsters a clean slate to repeat what they’ve done before.

“Insolvency practitioners investigate company directors and return money to creditors once a company enters insolvency. It can take time to find out the whole truth in a given situation, and even longer to trace hidden assets.

“While repeated company failures do not necessarily signal wrongdoing by anyone, it’s very useful to have evidence of directors’ track records when investigating what has happened to a failed business.

“Fraudsters often dissolve their corporate vehicles in the hope that no one will pursue them, and it’s not unusual for action to be taken against a dissolved company many years later, so if we were unable to look back over a long enough period, there’s a real danger that corporate crimes could go undetected and creditor returns lost forever.

Neil Harrold is also highlighting the dangers that innocent business owners could face when working with individuals about whom they don’t have the whole picture.

He continues: “From an entrepreneur’s point of view, it’s essential that they know who they’re doing business with, whether as a partner in a new venture they’re setting up or as a supplier who needs to have confidence they’re going to get their invoices paid.

“The histories of dissolved companies needs to remain easily available over the long term, and the only people who would benefit from the removal of so much vital information from the public eye would be those who repeatedly open and close businesses for fraudulent purposes.”

By admin