Insolvency expert brands director disqualification laws “toothless” and demands three year ban


TOUGHER laws are needed to force rogue company bosses to cooperate with insolvency practitioners.

Matt Henderson, Head of Restructuring at Johnston Carmichael Chartered Accountants, has branded the Company Directors Disqualification Act 1986 “toothless”.

He wants the law beefed up so that directors who shirk their responsibilities can be disqualified for three years.

Company directors who refuse to cooperate should face an automatic three-year ban


Mr Henderson said: “The failure of directors to co-operate can be extremely prejudicial in insolvency situations and needs to be taken more seriously than it is at the moment.

“It’s not possible to quantify the seriousness of any offences if a director does not co-operate with an insolvency practitioner and there are no funds left to fund a formal examination of a director’s conduct.

“A company director could be hiding gross unfit conduct behind what is perceived as a minor compliance failure.”

He added: “In too many cases, where directors have been reported and have demonstrated a blatant disregard for their legal duties and responsibilities, there are no repercussions.

“It’s extremely frustrating for the insolvency profession how toothless the legislation is in practice.”

Johnston Carmichael says over the past two years, 55% of directors either failed to return a Statement of Affairs report to the firm or other unfit conduct was detected.

Mr Henderson added: “When a company gets into financial difficulty the directors have a legal responsibility to ensure that the position of creditors does not worsen and so they must take action.

“If they fail to do so through a lack of co-operation and disregard for the insolvency process, I believe an automatic disqualification preventing them from acting as a director in the UK for a period of three years should follow.”