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Director bans lengthen as the Insolvency Service cracks down

Mike Finch

The number of company directors receiving longer bans for corporate wrongdoing has hit a six-year high as the Insolvency Service continues its crackdown on rule-breaking directors.

The Insolvency Service handed out 573 director disqualifications lasting more than five years in 2016, the highest figure since 2010/11, and up 8% on 532 disqualifications last year.

The rising number of longer bans is part of the Insolvency Service’s crackdown on misconduct by company directors. The organisation is taking tougher enforcement action on issues including:
  • Repaying friends and family ahead of other creditors – often HMRC;
  • ‘Phoenixing’ – transferring assets to a new company to avoid repaying creditors;
  • using company money for personal benefit;
  • keeping a company trading while unable to pay its debts.
Director disqualifications can last up to 15 years in the most serious cases, and prevent an individual from being involved in the formation or management of a company. Disqualified directors are also personally liable for the losses of any business they are involved in while disqualified, and may also face criminal prosecution.

Mike Finch, Restructuring & Insolvency partner, comments: “The Insolvency Service is now tougher than ever on directors they can prove have broken the rules and left creditors out of pocket.

“This is particularly the case where the taxpayer is left short-changed by a company failing to pay its tax bills. Unpaid debt to HMRC is very easy and cheap to prove, meaning people are much less likely to get away with wrongdoing.

“Directors whose companies are in trouble need to make sure they are not tempted to break the rules in a misguided attempt to save jobs. They are more likely than ever to get found out, and to severely damage their future prospects.”

Insolvency Service hands out more 5yr+ director bans in crackdown