Research and analysis

RPC opinion: disqualification of dissolved company directors

Published 29 July 2026

Lead department: The Insolvency Service

Summary of measure: a review of the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021

Submission type: post-implementation review

Implementation date: 16 December 2021

Department recommendation: keep

RPC reference: RPC-DBT-26170-PIR(1)

Date of issue: 3 July 2026

RPC opinion rating

Fit for purpose:

• the evidence presented in the post-implementation review (PIR) provides a sufficient and proportionate basis for the department’s recommendation to keep the regulations
• the use of investigations data from the Insolvency Service and specific case studies is appropriate for this review
• the PIR employs a proportionate approach, given the low impact nature of the measures
• the policy has been evaluated sufficiently, with the PIR providing a sufficient review of the policy objectives

RPC opinion summary

Recommendation: Green

The evidence presented in the PIR provides a sufficient and proportionate basis for the department’s recommendation to keep the regulations. The use of investigations data from the Insolvency Service and specific case studies is appropriate for this review.

Monitoring and implementation: Satisfactory

The PIR employs a proportionate approach, given the low impact of the measures. The review uses a variety of evidence sources, though is primarily based on internal data. The PIR could be improved by justifying not conducting a formal engagement exercise.

Evaluation: Satisfactory

The policy has been evaluated sufficiently, with the PIR providing a sufficient review of the policy objectives. The review should have evaluated the relevance of the policy objectives going forward. The PIR also considers the unintended consequences of the measure.

Summary of proposal

The Insolvency Service (INS) is the primary agency with responsibility for enforcing the company and insolvency legal frameworks in the UK. The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 expanded the investigative and disqualification powers of the Insolvency Service to include former directors of dissolved companies.

A dissolved company is one that has been removed from the register of companies and no longer exists. Prior to the Act, the legislation did not permit investigation and subsequent disqualification of directors whose companies had been dissolved, unless the company had been restored to the register. As a result of this, there was a risk that rogue directors could exploit this loophole, at the expense of creditors and individual consumers.

The policy objective was to plug the legal loophole in the insolvency enforcement landscape to address two major concerns. Firstly, to ensure that rogue directors who abuse the company and insolvency law regimes can be investigated and held to account. Secondly, to provide a deterrent against company directors who may use the dissolution of a company to evade their responsibility to repay Bounce Back Loans (BBL), giving the Insolvency Service enforcement powers to deal with BBL fraud.

The Bounce Back loan scheme was introduced to support businesses during the coronavirus (COVID-19) pandemic, allowing businesses to borrow between £2,000 and £50,000, at a low interest rate, guaranteed by the government.

Recommendation

The department has sufficiently made the case to support its recommendation to keep the regulations. This is based on the review concluding that the measures are meeting the initial policy objectives, costs incurred by businesses are lower than expected and that the unintended consequences are relatively minimal.

The key evidence for the PIR is based on data from Insolvency Service investigations, which has been supported by specific case studies, and data and assumptions from the initial impact assessment (IA).

The department has not conducted a formal engagement exercise, which is proportionate given the minimal cost of the regulations, however the PIR should do more to justify this.

The department has conducted a sufficient review of the regulations against the original policy objectives, however they should have evaluated both the relevance of these objectives going forward and whether the regulations need revision given their initial focus on BBL fraud, which is becoming less of an issue as time passes.

The department has re-estimated the costs of the policy, concluding that costs are slightly lower than expected in the 2021 IA, due to reduced familiarisation costs. The PIR also includes an assessment of the impact on small and micro businesses, showing that smaller businesses have faced a disproportionate impact, but cannot be exempted to achieve the policy objectives.

Overall, this approach is sufficient to support the department’s recommendation.

Monitoring and implementation

Proportionate

The PIR’s monitoring approach is proportionate. As the initial regulations were primary legislative measures, the department was not statutorily required to conduct a PIR. Despite this, the department has provided a reasonable assessment of the policy, considering the policy objectives, costs and benefits with a good range of evidence.

As a low impact measure, with an original equivalent annual net direct cost to business (EANDCB) of £5 million, RPC proportionality guidance expects a light-touch PIR. The evaluation conducted in this PIR clearly meets these expectations.

Range of evidence

The department has used a strong variety of evidence to support the PIR. These are focussed on data from the Insolvency Service on investigations that details how many occurred, what share resulted in a director’s disqualification and what share of these related to BBL fraud, as well as a set of 5 case studies to demonstrate how the powers have been used. This is in addition to data and assumptions held by the INS that have been used to reevaluate the costs and benefits originally estimated in the 2021 (IA).

The PIR would be improved by including more evidence of stakeholder views in response to the regulations. The range of evidence included in the PIR is sufficient to support its recommendations.

Gaps in evidence justified

The review would also benefit from considering further potential ways to gather evidence from key stakeholders affected by the regulations.

Evaluation

Policy objectives considered

The review considers the 2 original policy objectives: to ensure rogue directors who abuse company and insolvency law regimes can be investigated and held to account, and to provide a deterrent against company directors that may use the dissolution of a company to evade their responsibility to repay BBLs.

The evidence set out in the PIR has led to the department concluding that both these objectives have been met. The department uses evidence from the Insolvency Service to assess the success of the regulations against the first objective, showing that of the 194 investigations into dissolved companies, 41% have resulted in a disqualification order or undertaking. This helps demonstrate that directors of dissolved companies can be investigated and disqualified, however the PIR should have considered the outcomes of the other 59% of cases that did not result in a disqualification.

The review uses the same dataset to assess the second objective, showing that 91% of successful disqualifications were due to BBL fraud. This helps make the case the BBL fraud is being addressed, however does not give an indication of the potential scale of fraud the department believes there to be.

The review does not assess the relevance of the policy objectives going forward. This would have been especially beneficial in the case of the second objective, as the rate of BBL loan disqualifications has been decreasing as time passes. The review should have considered the consequences of this, and whether any revisions to the regulations would have been appropriate as a long-term solution rather than something targeted towards recovering Covid-19 related loans.

Unintended effects

The department has identified a number of unintended consequences, which have been considered in turn. These have then had the knock-on effect of incurring additional costs on both the Insolvency Service and banks. Despite the summary of various unintended consequences, the PIR does not provide a discussion of any potential solutions or mitigations to them. The department should consider what could be done to address these issues.

Original assumptions

The original impact assessment estimated a Net Present Social Value (NPSV) of -£23.4 million and an equivalent annual net direct cost to business (EANDCB) of £5 million (2019 prices). This analysis has been refreshed for the PIR, with some updated assumptions. These include a reduction in familiarisation time based on shorter published guidance, balanced by new familiarisation costs based on the aforementioned unintended consequences.

Altogether this has resulted in a revised NPSV of -£18.8 million and EANDCB of £4 million (2019 prices). This supports the department’s argument that the regulations are not too burdensome on businesses.

Small and micro businesses

Small and micro businesses (SMBs) were not exempted from the original policy, due to evidence from consultation responses suggesting that the problem of abuse of the limited liability regime was particularly prevalent within SMBs.

The PIR considers the familiarisation impact on small and micro businesses, estimating a cost of £4.26 million. The PIR should justify the assumption that familiarisation costs are identical for all firms. The review continues to argue against an exemption, as the problem of abuse of the limited liability regime through the dissolution process is particular to SMBs.

This justification is sufficient, however would be improved by using data on investigations and disqualified directors to show what share represented small and micro businesses.