The number of company directors that have been disqualified by the Insolvency Service fell by 24% in the last year, from 1,280 the year before to 972 in 2020/21, according to research by UHY Hacker Young.
UHY said that the fall in disqualifications of directors last year is an “unusual result” given the scale of last year’s “record-breaking” recession in 2020.
According to the group, directors are far more likely to “attempt financial misconduct” during economic downturns to “maintain their personal income or to try and save their businesses”.
Peter Kubik, partner at UHY, said that the low number of directors being disqualified in the last year is partly due to government measures to “artificially reduce the number of corporate insolvencies”.
Kubik added that misconduct by directors is often only discovered “once a business has become insolvent and an insolvency practitioner looks at what has happened”.
He said: “It is concerning if directors are escaping penalties for committing financial misconduct. If criminal behaviour of directors isn’t punished then there will be little incentive for other directors to follow the rules in the future.”
If found guilty of fraud, a director can be banned from acting as a company director for up to 15 years and can face jail time.
Directors may also be banned from setting up a near identical business after dissolution, so they cannot continue trading whilst leaving creditors and HMRC unpaid.