The UK Insolvency Service has powers to investigate directors' conduct, to commence directors' disqualification proceedings and to enter into disqualification undertakings.
Its recent newsletter reveals that in approximately 10% of cases, directors are disqualified for a period in excess of 10 years. The reasons given for these lengthy bans include VAT fraud and scams; misleading members of the public; failing to promote the interests of their company, for example by failing to avoid a conflict of interest; falsifying information; misappropriating company funds; failing to keep proper accounting records; and inappropriate dealings with tax liabilities.
The Insolvency Service will use the maximum sanctions available to it under the Directors Disqualification Act 1986. The latest quarterly statistics for the period from April to June 2015 reveal that during this time, 309 directors were disqualified, with the average length of disqualification being 6 years. In addition, the number of directors disqualified for between 10 and 15 years has increased from 12% to 16% in the same quarter in the previous year. Finally, the most common form of allegation was unfair treatment of HMRC compared to other creditors.
Monitoring the issues dealt with and the sanctions imposed by the UK Insolvency Service should assist companies (and their D&O Insurers) to identify the areas of risk management where they need to focus going forward.