Director Disqualifications Up

The number of company directors getting disqualified following insolvency proceedings shot up by 17% last year as the recession forced directors into rash decisions to safeguard their personal financial positions.

All company directors have a director’s disqualification report filed against them when a company goes into some form of insolvency, normally the report comes back clean, however it seems the recession is forcing more and more directors into unlawful business decisions.

This comes according to law firm Wedlake bell, they said that in the year leading up to the end of March 2010, 2169 company directors have been disqualified, following on from 1852 in the 12 months previous.

Edward Starling, partner and head of the rescue and restructuring team at Wedlake Bell, said, “A recession traditionally leads some directors to break the law in a last ditch attempt to save their business or their own personal financial situation.  When a company goes bust and an insolvency practitioner gets appointed these irregularities are uncovered.”

Wedlake Bell also said that there were also more and more cases of multiple directors at the same company are facing banning orders because the Insolvency Service is finding more instances of collusion between directors.  While 1,047 companies were targeted in the last year the number of directors facing a ban was more than double this at 2,169.

According to the research, the biggest growth in the reasoning behind director disqualification was for non-commercial transactions whilst insolvent.  This shot up by 56% to 388.

Another large rise was in cases involving criminal activity such as fraud, seeing a 52% rise to 265.  Also, a massive 813 banning orders were handed out relating to unpaid company taxes.

Posted at 04:33PM Jul 19, 2010 by Marc Stenton in Insolvency  |  Comments[0]