Recession causes many more director disqualifications

20/07/2010

Increasing numbers of company directors are facing professional disqualification, after figures showed that the number being barred from their roles increased by 17 per cent last year.

City law firm, Wedlake Bell, said that 2,169 directors of insolvent companies had faced disqualification in the year to March 2010. This compared with 1,852 during the previous year.

Head of the rescue and restructuring at Wedlake Bell, Edward Starling, said the recession had caused more suspect decisions to take place, with directors placing personal interests ahead of business ones.

“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," he said.

"When a company goes bust and an insolvency practitioner gets appointed these irregularities are uncovered.”

There were also rises in multiple disqualifications of directors from firms, indicating collusion between them. The 2,169 directors were disqualified from just 1,047 companies.

The most common transgression was directors caught making non-commercial transactions while companies were insolvent, rising 56 per cent to 388 recorded. Underpaid tax resulted in 813 banning orders, and the number of directors banned for criminal matters including fraud and theft, however, rose by 52 per cent with 265 disqualifications.

Starling added the number was likely to increase even more:
"As the delay between insolvency and disqualification proceedings catches up, there may be many more actions in the next 12-18 months.”