Directors’ Disqualifications Up By 60% Since 2022

Recent figures from the Insolvency Service show that the number of company directors disqualified in 2023 so far has increased by 61.5%, compared to the same period last year.

Although we are only 2 months into the 2023 financial year, there have been 182 disqualifications so far. This compares to just 112 in the same period in 2022. This has been steadily increasing from a low in 2020 and 2021.

So, whilst some of this dramatic increase may be down to low company insolvency rates during the Covid-19 pandemic, there is definitely a worrying trend emerging, especially when looking at the reasons for disqualification.

Why Can A Director Be Disqualified?

There are a wide variety of reasons that can cause directors to be disqualified. In general, however, a disqualification order can be made if a director’s conduct has:

“Fallen below the standards of probity and competence appropriate for persons fit to be directors.”

Although vague, this essentially means that company directors are held to a high standard. If you have not met the expected standards of a director, you could be disqualified.

Often this is due to financial mismanagement, fraud, misleading creditors or trading whilst insolvent to name a few.

What Is Causing The Increase In Disqualifications?

Although there are various reasons why disqualification can happen, there is one driving force behind the increase over the past year.

“COVID-19 financial support scheme abuse” accounted for 48% of all orders in 2022 and nearly 55% in 2023 so far. This is a direct result of falsely claimed and misspent CBILS and BBLS loans. As more and more companies fail to maintain payments and go into liquidation, more of these cases are being uncovered.

Beyond this, nearly every other reason for disqualification has decreased. As more businesses fail to pay back these loans, we are only going to see an increase in disqualification and other legal action.

The seriousness of some of these orders is shown by the increasing length of disqualifications. Since 2020, the average length has increased by nearly 2 years to 7.4 years. This shows just how seriously the insolvency service is taking the abuse of Covid loan schemes. In addition to this, we are likely to see an ever-increasing number of criminal convictions and compensation orders against directors. It could be several years or longer before most of these cases have been unravelled.  

If you are worried about putting your company into liquidation or think you could be at risk of disqualification, you need advice from business insolvency specialists. You can call us on 0333 305 4331, request a callback or join our live chat to get the guidance you need.