Directors who dissolve companies to avoid paying workers or pensions could face hefty fines or be disqualified from running a business for the first time.

The government is to press ahead with new plans to safeguard workers, pensions and small suppliers when a company goes bust.

Under the shake-up, bosses will face investigation if they try to escape paying a dissolved company’s debts to their own staff and creditors.

While the vast majority of UK companies are run responsibly, there are a minority of directors who deliberately dodge debts by dissolving companies then starting up a near identical business, with a new name. The practice is known as ‘phoenixing’ or ‘bumping companies’.

Under the new powers the Insolvency Service will be able to fine directors or even have them disqualified.