'Get tough on insolvency': Aim of protecting public not fully met, says National Audit Office

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The Independent Online
THE NATIONAL Audit Office is urging greater action against the managers of insolvent companies after finding that up to 50 per cent of directors who should be disqualified in the public interest are not being proceeded against.

Sir John Bourn, Comptroller and Auditor General and the office's head, says in a report to Parliament today that the Government's insolvency service has provided 'a measure of protection' against directors' unfit conduct.

However, it is not meeting fully the aim of protecting business and the public against directors who abuse limited liability status.

The hard-hitting report says the record numbers of insolvencies in recent years have contributed to a quadrupling of the organisation's workload since 1987-88. This, combined with different procedures in Scotland and regional inconsistencies, means that not all cases meriting disqualification in the public interest result in proceedings.

Since the introduction of the 1986 Company Directors Disqualification Act there have been about 153,000 corporate insolvencies, with elements of unfit conduct identified in about 28,000. But by 31 March this year the service - an executive agency of the Department of Trade and Industry - had made only 3,000 applications for disqualification and 1,700 people had been barred from directorships for between two and 15 years. About 1,000 cases had not yet been decided.

Among the recommendations in the report are:

Taking appropriate action, including adjusting office workloads, to make different Official Receiver offices' policies on disqualification proceedings more consistent.

Further liaison with the Lord Chancellor's Department to minimise the time between company failure and disqualification of directors. Up to six years may elapse ..TXE.-- Work with Companies House to make the public register of diTHER write errorsqualified directors complete - at present about half of disqualifications are not registered - and to ensure that disqualified directors are not appointed to new companies.

Promoting greater awareness among directors of the disqualification arrangements. More than half the directors surveyed by the National Audit Office were unaware of the procedures, while 61 per cent of insolvency practitioners said they did not deter unfit conduct.

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