The Insolvency Service has announced a consultation on the Corporate Civil Enforcement Reforms which will fundamentally change the way in which directors are disqualified.

Below is a summary of the key proposals:

Mandatory disqualification on public interest winding-up

The courts would be required to disqualify directors for five years if their company was wound up in the public interest.

Director Restrictions Regime

A new administrative restrictions regime will be introduced to tackle low level misconduct such as negligence and incompetence for a fixed period of three years.  A director would be able to act as a director but they may not be a sole director or sole signatory on the bank account.

The Secretary of State will replace the court as the decision maker for disqualifications with a statutory right to a appeal to a tribunal.

Changing the recovery powers in respect of antecedent transactions

These proposed changes will make it easier for office holders to bring claims against directors, shadow directors and funders.

Five year disqualification for directors failing to comply with HMRC securities legislation.

Powers to investigate live companies

This would allow the Insolvency Service to gather information and investigate live, solvent and trading companies. The outcome of these investigations include winding up in the public interest and possible disqualification.

Conclusion

The Insolvency Service are looking to expand their powers to be able to tackle live companies as well as insolvent companies.

Our concern is that the Insolvency Service become subservient to HMRC and seek to tackle those directors who abuse HMRC but ignore other forms of misconduct. The Insolvency Service have not commented as to how these proposals will be funded or enforced.   

It will be interesting to see what changes are implemented!!!!