Government scheme targets rogue directors

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The Independent Online

The government is planning a clampdown on corporate asset strippers and intends to make it easier for creditors to pursue former directors to make good their losses.

After a low-key pilot scheme, which has been running since July 2000, the Department of Trade and Industry intends to launch a Civil Recovery Scheme which will be operated by a network of insolvency practitioners across the country.

The scheme will allow creditors to pursue rogue directors without having to go through expensive legal action.

Patricia Hewitt, the Secretary of State for Trade and Industry, hopes the new scheme will allow creditors to claw back millions of pounds that would otherwise have proved too expensive to recover. A spokesman for the DTI told The Independent: "The pilot scheme has been a great success and we are now putting together teams of insolvency practitioners who will run the scheme across the UK."

Insolvency experts believe the scheme will act as a deterrent to dishonest directors who enrich themselves at the expense of businesses that are run into the ground and go bust. Nick Wood, a partner at Grant Thornton, the auditors, said: "The DTI now have an even bigger stick with which to beat recalcitrant directors. The Civil Recovery Scheme will be set up to pursue directors financially for their misdeeds on the back of disqualification proceedings. This should discourage the real rogues to whom disqualification appears to be merely a hurdle to be overcome in order to continue trading."

At the moment, if a company without assets goes bust creditors have to pursue former directors through the courts. However, court action generally proves too lengthy and expensive for many creditors to consider. Under the Civil Recovery Scheme, creditors can apply to have an insolvency practitioner appointed who is empowered to pursue former directors of insolvent companies that have been disqualified and recover assets on behalf of creditors.

New figures released by Grant Thornton show nearly 1,800 company directors were disqualified between March 2002 and April 2003. Of these 58 per cent were barred for 2-5 years, 39 per cent for 6-10 years and 3 per cent for 11-15 years.

The process for disqualifying directors has also been speeded up after a plea-bargaining system was introduced under the Insolvency Act 2000.

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