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Crackdown on Directors of Companies Trading Insolvently

May 08 2017

The number of people banned from serving as a company director has hit a six year high according to research by Moore Stephens. The Insolvency Service reserves its longest bans of longer than five years for those directors it finds running businesses in ways that harm creditors such as:

  • Continuing to trade while the company is insolvent
  • 'Phoenixing' - starting a new company and transferring assets to avoid paying creditors
  • Repaying money to friends or family ahead of other creditors such as suppliers or HMRC
  • Using company money for personal benefit ahead of repaying other creditors

The Insolvency Service handed down 573 company director bans in 2016, the highest number since 2010, and an increase of 8% on 2015.

In the most serious of cases, director disqualifications can last up to 15 years. During this period a disqualified individual is prevented from starting or manageing a company. Disqualified directors are also personally liable for the losses of any business they are involved in while disqualified, and can also face criminal prosecution.

Samantha White, CEO of My Credit Controllers, said

"These figures show just how important it is for businesses to remain vigilant, especially of companies you trade with under credit terms. If you want to avoid being caught with a bad debt, then collecting your money quickly from customers should be a high priority for any business."

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