Number of Company Directors Hit by Lengthy Bans by Insolvency Service ‘At 6-Year High’

The number of company directors who have been banned from leading or forming businesses for five years or longer reached a six-year high during 2015/16, according to the latest figures on the subject.

As many as 573 people were given long-term bans from acting as company directors during the year, with the Insolvency Service apparently taking a tough stance on corporate wrongdoing around the country.

The figures come from the accounting firm Moore Stephens, which has suggested that the Insolvency Service is becoming particularly hard on directors who use company money for personal benefit and on bosses who pay back family members and friends before their creditors in the context of an insolvency scenario.

Other actions which are understood to have caught the attention of the government agency last year include the process of transferring money to new companies to avoid repaying debts and the business of continuing to operate a company that has become unable to settle its outstanding debts.

The 573 directors who were banned for five years or more in 2015/16 represents the highest such figure since 2010/11 and an increase of 8 per cent on the previous 12-month period.

“The Insolvency Service is now tougher than ever on directors they can prove have broken the rules and left creditors out of pocket,” said Mike Finch, a partner at Moore Stephens.

“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.”

In many cases which have led to directors being disqualified by the Insolvency Service, the creditor to have gone unpaid is HM Revenues & Customs (HMRC).

The Insolvency Service is though particularly well placed to clamp down on company directors who avoid paying debts to HMRC in part because it is relatively simple for this type of debt avoidance to be detected.

“Unpaid debt to HMRC is very easy and cheap to prove, meaning people are much less likely to get away with wrongdoing,” explained Finch from Moore Stephens in a statement on the subject.