Lack of cash 'helps rogue directors'

Receivership specialists yesterday warned that far too many rogue directors are escaping punishment because the Department of Trade and Industry's disqualification unit is starved of cash, writes John Willcock.

The DTI's annual report on insolvency, published yesterday, showed that only 10 per cent of reports submitted by receivers on rogue directors were acted on last year. Of 6,630 reports on unfit conduct submitted by directors whose companies had gone bust, only 662 resulted in proceedings by the DTI. These in turn led to 409 people being disqualified from acting as directors of public companies, up from 317 the year before.

Steve Hill, of the accountants Coopers & Lybrand, who are Britain's busiest receivers, said the increase was due simply to more companies collapsing.

'Only 10 per cent of directors we report to the DTI are being proceeded against,' he said. 'Rogue directors can say to themselves: 'Even if the liquidator thinks I'm a rogue, there are nine chances out of 10 that nothing's going to happen.' This is not a comforting picture. The DTI's disqualification unit is under- resourced.'

Currently the unit is funded from failed companies themselves via a levy on insolvency cases and revenue from the Insolvency Account, in which liquidators have to bank the money they recover.

'If your house is burgled the policeman doesn't present you with a bill for investigating it,' Mr Hill said. 'The disqualification unit should be an expense on the public revenue.'