Director Disqualifications increase 33% in six months, from 377 to 501
Zolfo Cooper, a leading independent provider of advisory and restructuring services, has published its latest Disqualification Tracker, which analyses trends in director disqualifications and associated company failures.
Based on the latest data, covering July to September 2014 from the Insolvency Service, this quarter’s figures show the highest disqualifications since the start of our analysis. The number of directors disqualified increased 11% compared to the previous quarter (264 from 237) with 5.4 years being the average period of disqualification. Comparing the first six months of this financial year 2014/15 to the previous six months, the number of director disqualifications has increased 33% from 377 to 501.
This quarter the Financial & Insurance sector saw the largest increase in company failures due to director disqualifications, with double the number of failures this quarter. Compared with last year, director disqualifications in this sector have increased six-fold. Property & Construction also saw an increase of 55%.
Paul Huck, Director at Zolfo Cooper, comments: “This quarter, approximately half of the director disqualification orders were due to wrong doing during the credit crunch of 2008 -2010. With the likelihood of tougher measures being introduced when assessing conduct and when taking into consideration past misdemeanours, we could see further increases going forward.”
The majority of the disqualification orders (64%) were in relation to ‘Serious unfit conduct’, with directors facing disqualifications of between two and five years, in line with Q1 (65%). The number of companies which failed due to director disqualifications increased 14% (from 203 last quarter to 231). Compared to the same quarter last year (Q2 2013/14), it has increased 57%.
The number of disqualified directors increased to 264, however, the seriousness of the cases maintained a similar pattern as last quarter (64% Serious, 25% Very Serious and 11% Extremely Serious).
Last quarter the tracker included case studies of four ‘Extremely Serious’ cases, for Missing Trader Inter-community (MTIC) VAT fraud. Now eight years later, this quarter has seen six more cases resulting in disqualifications for frauds which occurred in 2005/06. All MTIC-related disqualification periods were for 12 to 15 years.
Losses and debts
Losses to known creditors fell this quarter, from £119.6 million to £68 million. HMRC continued to have the largest losses at £39.4 million, with £7.5 million owed to trade creditors and £8.3 million to investors.
Go to http://www.europe.zolfocooper.com/sites/default/files/Disqualification%20Tracker%20Q2%202014-15.pdf to read the tracker.