Business

Changes to business records will give guilty directors 'clean slate' claims R3 body

Companies House website
Companies House website Companies House website

PLANS to change 'record' rules at Companies House risks giving culpable directors a "clean slate" to hide their activities, it was claimed today.

The criticism came from Michael Neill, chairman of insolvency trade body R3 in Northern Ireland and partner at A&L Goodbody, Belfast, who said proposals to erase records of closed businesses after six years would hamper legitimate investigations.

Records are currently held by Companies House for 20 years.

The change has been made following complaints that information relating to long-dissolved companies being publicly available was inconsistent with data protection law.

But Mr Neill believes such a change would be detrimental to the investigations undertaken by the insolvency profession, hindering their efforts to detect culpability by company directors and potentially impacting on the returns available for creditors.

"It’s not uncommon to discover that directors have been involved in a number of companies which have gone out of business," he said.

"Deleting records after such a short amount of time would destroy evidence, hide the past behaviour of a director and effectively give culpable directors a clean slate to start afresh every six years.

"Insolvency practitioners investigate the conduct of company directors in order to ascertain the reasons for insolvency and, in some cases, to assess the prospect of recovering money for creditors once a company enters insolvency - but it can take time to uncover any culpable behaviour by a director, and even longer to trace hidden assets."

And while repeated company failures did not necessarily signal wrongdoing, Mr Neill said it was "useful" to have evidence of a director's track record.

"On occasion, directors will purposely dissolve their corporate vehicles in the hope that no one will pursue them," he added.

"It’s not uncommon for action to be taken against directors many years later.

"Companies House records are an incredibly useful resource for the insolvency profession. Deleting the history of dissolved businesses risks losing important information and the only people who would benefit from its removal from the public eye are those who repeatedly open and close businesses for their own purposes."