The government is set to take action to slam shut a loophole in insolvency rules frequently used by unscrupulous directors to escape investigation over failed companies.
Creditors have long complained that the Insolvency Service’s inability to open cases into dissolved companies has handed directors an opportunity to dodge accusations of malpractice.
It’s a sad but well-documented fact that the most unscrupulous individuals will happily try to exploit any crisis for their own gain.
So it was in spring 2020, almost as soon as the first COVID-19 lockdown kicked into gear, that there was a wave of reports of pandemic-related email and phone scams, trying on everything from fraudulent PPE sales to ‘phishing’ for personal information through bogus medical registrations.
The latest official figures detailing the number of convictions and other enforcement actions made under the Companies Act show that Insolvency Service activity is down by as much as 50% year-on-year in a number of key indicators.
The Insolvency Service publishes monthly statistics detailing the number of prosecutions, fines and winding up orders it has executed against individuals and businesses for breaching rules relating to the fit and proper running of businesses. Many of the actions are made under the terms of the Companies Act 2006, which sets out clear responsibilities for company directors and makes individuals personally liable for mismanagement of businesses leading to insolvency.
New figures from the Insolvency Service show a shocking decline in enforcement actions against unscrupulous businesses since the government’s austerity programme was introduced in 2010.
According to the Service’s regular Enforcement Outcomes updates, the number of interventions to wind up companies in the public interest is set to decline again this year, the fourth consecutive annual fall. Over the longer term, in 2009/10 there were 267 successful petitions to close companies down, compared to just 73 in 2017/18 - a decrease of 73%. In the current year, with just a month to go, there have been just 57 completed actions.