One is a small but significant legal change expanding the amount of oversight being granted to The Insolvency Service to conduct their investigations into company director disqualifications.
Last week the government published a memorandum explaining why The Insolvency Service, and some other public agencies including the Environment Agency and the Pensions Regulator, are being granted access under the Investigatory Powers (Communications Data) (Relevant Public Authorities and Designated Senior Officers) Regulations 2020.
The Investigatory Powers Act 2016, sometimes referred to as the “snoopers charter”, set out a list of public authorities that could legally obtain an individual’s communications data. As well as the intelligence and law enforcement agencies and HMRC, they also included other bodies such as the DWP, Food Standards Agency and the Gambling Commission.
The ‘rather surprising in its honesty’ rationale given being “they are increasingly unable to rely on local police forces to investigate crimes on their behalf.”
Regarding the addition of the Insolvency Service, the memorandum states: “Fraudulent trading committed by company directors and cases involving breaches of company director disqualification orders feature in a significant number of investigations.
“Such breaches are considered by the courts to be serious misconduct attracting custodial sentences; individuals will often have been disqualified for previous company failings, incurring losses to creditors.
“The Insolvency Service assess that by acquiring communications data and being able to attribute subscribers to telephone numbers and analyse itemised billings, significant weight will be added to evidence that can be gathered. IP addresses and underlying e-mail account details will also be increasingly useful lines of enquiry to solve crimes within their remit.”
Most company directors whose businesses go into liquidation have done their duties to the best of their ability and done nothing but their best to try and make a success of their company. It’s a lot harder than it looks.
Chris Horner, Insolvency Director of Robson Scott Associates, said: “When we work with any insolvent company, we’re legally obliged to give a report on the conduct of each director to The Insolvency Service.
“99% of the time there’s nothing untoward to report and everybody has done their best to keep the company going. Occasionally we do come across misconduct and we have to investigate it to determine if the director involved is fit to be a director of any other companies in the future..
“The term misconduct covers several activities including:-
- Defrauding creditors
- Taking unwarranted risks with creditors’ money
- Misappropriation of company assets or money
- Failing to pay debts or cover losses
- Taking out loans for personal or no company benefit
- Taking excessive money from the business for themselves
“If they don’t accept responsibility and agree to a voluntary undertaking of disqualification then the Insolvency Service can take court action against the defendant.
“Voluntary undertakings are usually more lenient than court-ordered disqualifications. The minimum length of any ban is two years but if the court considers the actions to be really serious then they can stretch to up to 15 years.”
“Some people can’t help themselves and look to continue being directors even while banned. If discovered then they risk prison as it’s a criminal offence and they can also be held personally financially liable for the debts of the company they are involved with.”
As well as trying to help businesses restructure, an important part of our duties are to reassure directors about their future.
There isn’t a successful entrepreneur in the world that hasn’t had one or two failures in their locker. It’s usually those failures that taught them the most important lessons and gave them the motivation to succeed next time around.
After this we can then work with you to create a roadmap for restructuring or orderly closing your business that will allow you to move on confidently.