Director Disqualifications No Longer Dominated By Unfair Crown Treatment

If one surveys the landscape of director disqualification statistics one can see how they are now dominated by the loss suffered by government funds to a greater degree than at any time in the last 10 years or so. However, this is not matched by a material overall increase in the number of disqualifications. But director disqualifications are no longer dominated by unfair crown treatment.

Notwithstanding the increase in focus on government funds put at risk which was inevitable due to the Pandemic, the number of disqualifications overall has remained reasonably stable.

Section 6 Director Disqualifications

Section 6 of the Company Directors Disqualification Act 1986 traditionally accounts for the vast majority (96% in the year 2023/2024) of director disqualifications concerning companies that either have gone insolvent or have been dissolved without an insolvency procedure.

Recent statistics updated on 10 May 2024 on the government website page Insolvency Service Enforcement Outcomes 2023-24 show the concentration of disqualifications where Covid-19 finance from the government has been abused and led to disqualification of directors. It accounted for 71% of director disqualifications under Section 6 for the year 2023/2024. Of 1,164 disqualifications 831 were related to Covid-19 finance, such as abuse commonly of the bounce back loan support scheme.

Compare this to the position before the Pandemic. In the year 2018/2019 there were 1,072 Section 6 director disqualifications out of the total of 1,246, making them 86% but there were none at that stage obviously due to Covid-19 finance abuse. What there were however was 660 allegations known as Unfair Treatment of the Crown of the Section 6 type out of a total of 1149 Section 6 type allegations making government funds related allegations only 57% of the total.

For years before Covid-19 came along this Unfair Treatment of the Crown hovered at between roughly 50-60% of the disqualification allegations as the dominant government funds triggering disqualifications.

What appears interesting is that in the year 2022/2023 the percentage of disqualification allegations of insolvent companies under Unfair Treatment of the Crown plummeted to new depths at 19%.

Indeed it seems notable that notwithstanding the extent of bounce back badness reported there does not appear to be any real sign of a significant swing upward in the numbers of directors disqualifications. Indeed in the years 2009 to 2020 the overall number of section 6 disqualifications was actually often more than in 2023/2024. Only in 2012/20213 was the number quite a bit lower. This does seem rather surprising. It seems again Covid-19 has in effect taken over with other allegations presumably not being taken forward perhaps?

One has to wonder how it can be that trading to the detriment of the crown has dropped to such a level that it is now below 20% of Section 6 allegations.