The Insolvency Service report again, this time on disqualifications.

Posted on Nov 09, 2023. by NTI

The Insolvency Service are churning out statistics at what seems to be an ever-increasing rate that makes you suspect someone is constantly pressing send on Freedom of Information Requests.  The latest statistics focus on the numbers of director disqualifications as well as Bankruptcy and Debt Relief Order restrictions. 

As you will of course be aware, a director can be disqualified for a period of between two and fifteen years following unfit conduct.  The website provides examples of such conduct including allowing a company to continue trading when it is insolvent, not paying tax to HMRC or using company assets for personal benefit (but which is interestingly silent on abuse of Covid support schemes). 

In the seven months between April and October 2023, enforcement action from the Insolvency Service has seen (some might say only) 681 directors face disqualification (an average of 97 a month) for a mean length of 8.3 years.  In the year to 31 March 2020, 1,280 were disqualified (an average of 107 a month).  The stark difference is the average length of a disqualification which was under five and a half years prior to the pandemic.

Further analysis of the current numbers shows that two-thirds of disqualifications since April have involved allegations of abuse of Covid financial support schemes, whereas in 2019/2020 just over half (55%) related to unfair treatment of HMRC.  Given the state is the 100% guarantor of Bounce Back Loans and major victim in other Covid loans, it seems the stated reason may be different, but the underlying cause is the same.  However, the abuse of Covid is seen as worse with the 50% rise in average length of disqualification.

The ability of The Insolvency Service to take actions following the dissolution of a company (rather than an insolvent Liquidation or Administration) was introduced during the early part of 2022, as a response to the concern in the media to the widescale striking off applications being made on companies where there was no intention to repay Covid support, primarily Bounce Back Loans.  However, it seems the Insolvency Service doesn’t yet want to play with its new toy, or know quite how to, or (more probably) have the time to play, with less than 4% of this year’s disqualifications relating to dissolved companies.

A Bankruptcy Restrictions Order extends the restrictions of Bankruptcy (such as the ability to get credit over £500 without declaring your Bankruptcy) for a period of again between two and fifteen years.  Since April 2023, there have been only 70 such orders for an average length of 8 years.  This number has dropped remarkably since 2019/2020 where the number for the year stood at 470 although the length of the average restriction was much lower at under five years.  Again, the most common reason this year (63%) was the abuse of Covid schemes.

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