The new course of action aims to reduce the number of cases
against delinquent directors which resulted in the disqualification
of 1,540 UK directors last year.
Commenting on the problem Dr Howells stated:
“Frequently when companies fail and a
disqualification order is made, directors have contributed to the
collapse by their negligence, misconduct or misappropriation of
company assets. Rogue directors will often ensure that there are
insufficient assets to pay the costs of the liquidation and
therefore frustrate recovery action.”
The Insolvency Service plans to set up a pilot scheme in which
it will act with insolvency practitioners, solicitors, counsel and
enquiry agents, collectively known as the Forensic Insolvency
Recovery Service (FIRS).
The Insolvency Service will receive advice from FIRS in any
legal action it brings to recover monies from directors who abuse
the system.
Dr Howells explains that:
“This partnership between The Insolvency
Service and the private sector will use existing legal mechanisms
for recovery which have previously been underused because of lack
of assets to fund legal proceedings. FIRS will operate on a
no-win-no-fee basis with insurance or an indemnity to protect
against possible adverse costs… The government sees effective
enforcement as a vital part of its support of enterprise and
entrepreneurship.”
