Here’s why
The number of British company directors disqualified from holding such a position has increased for the third year running to 1,231 in 2017/18 (see graphs below), says Moore Stephens, the Top 10 accountancy firm.
Moore Stephens says that the continual increase in disqualifications shows that the Insolvency Service is keeping up the pressure on rogue directors and limiting the damage they can do to clients and creditors.
Disqualification Orders and Undertakings ban individuals from being directors of a limited company and from being involved in the management or promotion of a company or limited liability partnership for up to 15 years.
Directors of companies can be banned for a number of different reasons, including the misappropriation of assets, making transactions to the detriment of creditors and criminal matters.
Moore Stephens says the courts have also been taking an increasingly tough line with disqualified directors, with the average length of bans increased to 7.7 years in 2017/18, from 6.9 in 2011/12.
Jeremy Willmont, Head of Restructuring & Insolvency at Moore Stephens, says: “Despite the overall increase in disqualifications, the Insolvency Service needs more resources to tackle the problem.”
The Insolvency Service has focused on offences that are easy to prove and cheaper to investigate such as unpaid tax (up 7% in last 12 months) in contrast to more expensive criminal cases (down 37% in 2017/18).
Moore Stephens says an increase in funding would allow the Insolvency Service to tackle more complicated and time consuming cases.
One high profile and complex case has been the investigation into the collapse of BHS in 2016.
The Insolvency Service has just begun proceedings against Dominic Chappell, the former owner of BHS, and is seeking to ban him from holding a directorship for 15 years.
In the last month, Sunetra Atkinson, former director at failed charity Kids Company, has been banned from the boardroom for two-and-a-half years for her involvement in the collapse of the charity. The Insolvency Service is continuing disqualification proceedings into the other eight directors.
Jeremy Willmont, says: “Despite a lack of resources, the Insolvency Service is keeping up the pressure to root out rogue directors particularly in relation to high profile cases.
“Directors who do not abide by the rules are more likely than ever to be caught, but there is always more that could be done.
“When a company is in financial distress, some directors may be tempted to break the rules to keep the business going a little bit longer. However, longer disqualification periods and the increase in disqualifications should persuade directors to seek professional advice before making any decisions that could adversely impact the rest of their careers.”
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