19/07/2010

By Graham Buck

The number of company directors facing disqualification shows a year-on-year rise of 17%, according to law firm Wedlake Bell.

It reports that in the year to March 31, disqualification proceeding totalled 2,169 against 1,852 in the previous year.

A breakdown of the figures shows many directors breaking the law in an effort to shield their company from the effects of recession. There was also an increase in the number of directors facing disqualification at insolvent companies.

However, the authorities are evidently not accepting the recession as an excuse for improper conduct says Edward Starling, a partner at Wedlake Bell.

“A recession traditionally leads some directors to break the law in a last-ditch attempt to save their business or their own financial situation,” he commented. “When a company goes bust and an insolvency practitioner gets appointed these irregularities are uncovered.”

The firm also suggests that the rise in disqualifications also shows that the insolvency service is uncovering more incidences of collusion.

The most common reason for disqualification proceedings against directors is underpaid tax, which accounted for 813 actions in 2009-10. The firm observed that directors of failing businesses often give priority to paying wages and supplier invoices and neglect tax liabilities.