4,000 `rogue directors' on loose in UK companies

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The Independent Online
There are more than 4,000 directors working in UK companies with at least 10 failed companies behind them, according to a report today that blasts Britain's inadequate laws for dealing with "rogue directors".

Almost a million, or over a third, of all British directors have been involved with at least one failed company, according to CCN Group, an information services company that tracks directors' performance.

Moreover, 307,000 directors, or nearly 12 per cent, are "serial failures" with multiple receiverships behind them. CNN's figures go back only seven years, so the directors in the survey could have even more failures behind them.

Yet because of the inadequate funding of the Government's Disqualification Unit and the rules it works under, only 2,855 individuals are currently disqualified from holding directorships.

The figures were received with a groan of recognition by senior liquidators who are the first in line in dealing with directors whose companies repeatedly go bust.

Chris Hughes, managing partner of Coopers & Lybrand's business recovery division, Britain's biggest receivers, says: "There is a mentality amongst a lot of failed directors of `I'm alright Jack, sod the rest of you.'

"When their business collapses, they think it's all the bank's fault and that the company's assets still belong to them - not the creditors. The directors' first instinct is to turn up with a truck in the middle of the night and drive off with the company's plant, leaving an empty cupboard for the creditors."

Mr Hughes adds: "The [disqualification] legislation is disappointing. It gives rogue directors a gentle slap on the wrists when they should have their legs chopped off."

Tim Morris, director of CNN's business information division, says: "Of the 2.6 million individuals on the database, 952,432 have been associated with a failed company over the last seven years. But even more alarming is the fact that 3,229 men and 455 women have had more than 10 failures each."

Mr Morris adds: "Many company failures are the result of unfortunate economic and trading conditions and few lenders would regard association with just one failed company as a sign of dishonesty or incompetence. The real problem is the `serial failure' who moves from one failed firm to another, often deliberately closing them down to avoid paying their debts."

A former liquidator who has frequent dealings with the Disqualification Unit, part of the Government's Insolvency Services Agency, pins a lot of the blame on underfunding by Government.

"The Government wants the unit to disqualify more and more directors and gives the unit less and less resources.

"There is no doubt that the will is there, but the judicial process of disqualifying a rogue director company is getting longer and longer. It should be about six weeks after the liquidators of the company deliver their report to the unit, but often it takes months."

The former liquidator thinks there should be a new rule introduced which automatically raises questions about directors who want to join yet another company after three or four failures - a "four strikes and out" system.

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