Directors in 30% of insolvency cases are referred to the Insolvency Service’s Disqualification Unit for unfit conduct.
The 15,412 business insolvencies that were examined by insolvency practitioners in the last year (12 months to 30 March 30 2014), directors at 4,671 companies were reported for potential misconduct (see chart).
Company directors suspected of wrongdoing in 30% of all business insolvencies
There has been a sharp increase in the number of reports of potential wrongdoing that are acted on by the Insolvency Service.
The Insolvency Service has started disqualification proceedings against 1,273 directors over the same period, meaning it started proceedings in 27% of the 4,671 cases reported to it for investigation. This is an up from just 21% three years ago when only 1,031 proceedings were started after 5,401 reports were sent to the Insolvency Service (see pie charts).
If there is evidence of poor conduct by directors of an insolvent company, a report is filed to the Insolvency Service which can then take action to have that director disqualified from being a director for up to 15 years.
Partner, Mike Finch
comments: “These figures show just how frequently insolvency practitioners are finding evidence that points towards serious misconduct by directors. These are cases where there is strong evidence that a company director has broken the rules to the detriment of creditors like lenders, suppliers and HMRC.”
Significant budget cuts for the Insolvency Service had led to fears that reports of misconduct by directors were not being acted upon.
says: “The Insolvency Service has delivered a substantial improvement in the number of disqualification proceedings against dishonest directors.
“It is important that the funding is there to all the Insolvency Service to pursue these cases as disqualifying rogue directors acts as a crucial deterrent and is vital to ensuring a fair deal for creditors in an insolvency.
“Having an effective enforcement regime for dishonest directors is in everyone’s interests and is critical to ensuring that honest business owners can compete on a level playing field.”
Percentage of cases where the Insolvency Service started disqualification proceedings after a director was reported to it for unfit conduct
Restructuring and insolvency