Company bosses in almost a third of insolvency cases are referred to the Insolvency Service's disqualification unit for unfit conduct, according to research.
The research, carried out by Moore Stephens, the accountancy firm, reveals that directors in 30% of insolvency cases are referred to the Insolvency Service's disqualification unit for misconduct.
If evidence of poor conduct by directors of an insolvent company is found, a report is filed to the Insolvency Service, which can then take action to have that director disqualified from being a director for a period of up to 15 years.
Out of 15,412 business insolvencies examined by insolvency practitioners from March 2013 to March 2014, directors at 4,671 companies were reported for potential misconduct, with a notable increase in the number of reports of potential wrongdoing that were acted on by the Insolvency Service.
Disqualification proceedings were started against 1,273 directors over the same period, which is in 27% of the 4,671 cases reported to it for investigation. This is up from 21% in 2011, when only 1,031 proceedings were started after 5,401 reports were sent to the Insolvency Service.
Mike Finch, partner at Moore Stephens, said: "These are cases where there is strong evidence that a company director has broken the rules to the detriment of creditors like lenders, suppliers and HMRC.
“It is important that the funding is there to all the Insolvency Service to pursue these cases, as disqualifying rogue directors acts as a crucial deterrent and is vital to ensuring a fair deal for creditors in an insolvency.”