Strategy & Operations » Leadership & Management » Directors suspected of wrongdoing in 30% of insolvencies

DIRECTORS in 30% of insolvency cases are referred to the Insolvency Service’s Disqualification Unit for unfit conduct, according to Moore Stephens, the top ten accountancy firm.

Out of 15,412 business insolvencies examined by insolvency practitioners in the 12 months to 30 March 2014, directors at 4,671 companies were reported for potential misconduct. There has also 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 – up from just 21% three years ago when only 1,031 proceedings were started after 5,401 reports were sent to the Insolvency Service.

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.

Moore Stephens Partner, Mike Finch said: “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.

“The Insolvency Service has delivered a substantial improvement in the number of disqualification proceedings against dishonest directors.”