R3 Wrong to Blame Cable’s Insolvency Service for Fall in Company Director Disqualifications

The UK’s leading professional association for insolvency and business recovery specialists, R3, claims dodgy company directors are escaping punishment because the Insolvency Service (IS) is more concerned with meeting targets than launching complex investigations.

According to R3, while the number of reports alleging director misconduct has doubled since 2003, during the same period there’s been a 20% reduction in the number of directors disqualified as a result of an IS investigation.

R3 accuse the IS of focusing on simple and routine cases, but I think the criticism is undeserved.

There’s been a recession, which helps to explain the increase in the number of insolvency practitioners reporting director misconduct; there’s a knock-on effect.

Moreover, other than allegations of wrongdoing, there are additional factors the IS must navigate before disqualifying a director.

The organisation is an under-funded executive agency of the Vince Cable-led Department for Business Innovation and Skills, which has been subject to severe cutbacks.

Even if they wanted to, the IS cannot follow up every case of misconduct with an investigation; it would be far too expensive.

The overriding decision on whether the IS follows-up a report of wrongdoing has to be a commercial one as the organisation has a limited budget; therefore only extreme cases will be subject to further investigation.

The IS doesn’t have an endless pot of money to commit to an infinite amount of investigations and prosecutions, and R3 should know this already so their assessment is more than a little baffling.

R3 must remember that investigations are labour and capital intensive, and the IS has to be mindful of how they commit taxpayers’ funds, particularly in such austere times.