More directors of failed firms are being banned

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THE NUMBER of directors being disqualified from running companies is going up while the rate of business failures is falling rapidly, according to the Department of Trade and Industry.

In 1993 the DTI's Insolvency Service, an executive agency that oversees company liquidations, banned 419 executives in failed companies from being directors in the future, up from 409 the year before.

There were 88 further disqualifications against individuals convicted of criminal offences in relation to failed companies, compared with 72 in 1992.

The figures are contained in the Insolvency Service's annual report for 1993. The report also shows a 15 per cent fall in the number of companies going into liquidation in England and Wales compared with 1992. In Scotland the fall was 18 per cent.

Each time a liquidator closes down a company he has to file a report on the behaviour of the directors in the company to the DTI. If the liquidator accuses a director of unfit behaviour then the DTI has to investigate and decide whether to disqualify, or sometimes prosecute, the businessman.

The liquidators themselves, who are usually employed by accountancy firms, have frequently complained over the last five years that the resources devoted to the Insolvency Service are inadequate to deal with the vast numbers of reports on unfit directors submitted each year.

There were 7,489 reports on unfit conduct submitted during 1993 - 859 up on the previous year.

The DTI launched proceedings to ban 422 of those directors, which resulted in 419 disqualifications. Liquidators accept that the DTI has a high hit rate when it acts, but fear that it acts on too few cases.

The DTI also supervises Official Receivers, the government-employed specialists who deal with corporate or individual bankruptcies where there are not enough assets to make it worthwhile employing a liquidator, or sometimes where fraud is involved.

In 1993 Official Receivers submitted 248 reports to the DTI alleging that criminal offences had been committed.

They also undertook, in co-operation with the police, a further 358 investigations.