Insolvency service updates on director disqualifications

The Insolvency Service has just updated its data on its enforcement activities relating to director disqualifications. Director disqualifications, under the Company Director Disqualification Act 1986 (CDDA), are part of the statutory framework that deal with insolvency, and the financial misconduct that sometimes causes, or is a consequence of insolvency.

 


How common are director disqualifications?

What February’s Insolvency Service data is showing us is that trends for 2017 look likely to stay on par with previous months / years.

Yearly numbers of director disqualifications

Over the last 3 years, approximately 1200 directors have been disqualified each year, and the year-to-date data shows that 16/17 will also be in that region. If we put this in the context of UK insolvency figures, it means that around 7% of company insolvencies lead to disqualification.

What do directors get disqualified for?

Ultimately, as company director, you can be disqualified for not meeting your ‘legal responsibilities’.

The Insolvency Service has a duty to investigate all allegations of unfit conduct. This can include:

  • allowing a company to continue trading when it can’t pay its debts
  • not keeping proper company accounting records
  • not sending accounts and returns to Companies House
  • not paying tax owed by the company
  • using company money or assets for personal benefit

In the article, ‘How worried should I be about director disqualification‘, we discuss some of the most common reasons directors get disqualified in more detail: just over half of the allegations are in relation to unfair treatment of the crown. However, increasingly, there are also disqualifications that have nothing to do with non payment of taxes.

How long do directors get disqualified for?

length of director disqualifications

Whilst the majority of bans last for around 2 – 5 years, the numbers of this length of ban have been decreasing in recent years, and the numbers of longer term bans have been ever-so-slightly increasing. Recent Insolvency changes have given the Insolvency Service a longer timespan – up to 3 years – to investigate directors’ conduct, which broadens the scope of its abilities to prepare evidence. The changes also mean that disqualification bares a greater financial penalty with compensation to the estate now being attached to disqualification orders.

What to do if you are concerned about director disqualification.

Contact one of our business rescue experts directly. We understand the process from both sides of the coin – as ‘poacher and gamekeeper’ and have significant experience and skill in negotiating on your behalf.

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