Rogue directors who deliberately dissolve companies to evade liabilities will face fresh penalties and sanctions, it has been announced.

The Insolvency Service said the new powers will help creditors and staff get paid when a company has entered into administration or liquidation, or live companies “where there is evidence of wrongdoing”.

The new rules – known as the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act – allow the Insolvency Service to investigate and disqualify company directors who abuse the company dissolution process, as well as those who avoid repaying Government-guaranteed loans, such as Bounce Back Loans and Coronavirus Business Interruption Loans.

Directors may face new sanctions if misconduct is found, including disqualification as a company director for up to 15 years or prosecution.

Rogue directors may also be forced to pay compensation to creditors who have “lost out due to their fraudulent behaviour”.

Commenting on the move, Business Secretary Kwasi Kwarteng said: “We want the UK to be the best place in the world to do business and we have provided unprecedented support to businesses to help them through the pandemic.

“These new powers will curb those rogue directors who seek to avoid paying back their debts, including government loans provided to support businesses and save jobs. Government is committed to tackle those who seek to leave the British taxpayer out of pocket by abusing the covid financial support that has been so vital to businesses.”

Stephen Pegge, Managing Director of UK Finance, added: “The ability to dissolve a company when necessary is a right reserved in legitimate circumstances where there are no outstanding creditors, however, it can be open to abuse.”

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