Is the director disqualification process futile?

In March 2022, P&O Ferries’ chief executive Peter Hebblethwaite brutally dismissed 800 workers without the consultation required under UK law. His actions led to the press and people on social media demanding consequences for such insensitive and potentially unlawful actions.

Additionally, the government agency responsible for investigating director misconduct, the Insolvency Service, has commenced civil and criminal proceedings. The Trades Union Congress (TUC) also called for Hebblethwaite to be disqualified as a company director.

Last month, the TUC wrote to the Insolvency Service claiming that P&O’s directors had breached the Companies Act by failing to regard the welfare of their employees.

Flawed director disqualification process

This sounds good in theory. But there are also two important questions that need answering:

1. How effective are these inquiries into company director misconduct?
2. Is the Director Disqualifications process too soft?  

We’ve seen many inquiries before, most notably into RBS Bank after the financial crises. But in all honesty, very little came of it. It’s hard to verify the misdemeanours of a company director. And even if wrongdoing is proven, the penalties and enforcement are feeble.

The power to strike off a company director rests with the Insolvency Service. But the agency’s resources are stretched.

Insolvency Service objectives

Rather than targeting devious and delinquent directors, the agency’s primarily concerned with:

• Supporting those in financial distress
• Tackling financial wrongdoing
• Maximising returns to creditors

Furthermore, on the rare occasion there’s an insolvency investigation, the agency tends to:

• Target low-hanging fruit offenses such as failure to keep proper records
• Avoid more contentious issues

In truth, there isn’t any real evidence the director disqualification process is a successful sanction for director misfeasance and unlawful conduct. Many of the directors who receive this punishment simply set up new companies in a spouse or relative’s name.

The director disqualification process in the UK remains in limbo without tougher regulations and a more professional framework for corporate directors.