As a result of large numbers of corporate insolvencies, a 43.6 percent rise in Q1’09 alone, large numbers of company directors are being disqualified. Where company directors are found to have been guilty of misconduct, they can be disqualified from acting as a director in the future. Currently, some seven directors a day are disqualified as a result of investigations conducted by the UK Insolvency Service.

For those individuals who have no prospect of being able to repay their debts in full, bankruptcy represents a means of relieving the financial pressures, allowing debts to be written off after one year and giving the debtor the chance to start again having learnt the lessons from their experience of living with debt. 

However, bankruptcy must not be seen as an easy option for those who have contributed to their own problems. There are sanctions for those bankrupts whose behaviour can be seen as reckless, wilful or culpable and where debtors can pay something towards their debts, The Insolvency Service will ensure that they do pay.   In the last quarter, 59 directors were disqualified for 10 years or more – a very serious sanction.

Stephen Speed, chief executive of The Insolvency Service said, “Insolvency procedures exist to provide debt relief for insolvent companies and individuals enabling them to make a fresh start and regularise their financial position. However insolvency procedures do have serious consequences and can have far-reaching implications for directors and individuals.”

“It is vital that any person or any company concerned about their financial position should seek advice as early as possible.  Insolvency can often be avoided entirely by taking early action.” 

Although the numbers of corporate insolvencies in the first quarter of 2009 has risen by 43.6 percent over the same period last year, reflecting the impact of the recession on business, many companies continue to make use of the rescue mechanisms such as administration and company voluntary arrangements (CVAs) so that they can keep trading and where possible, save jobs and supply chains.

Company insolvencies

There were 4,941 compulsory liquidations and creditors' voluntary liquidations in total in England and Wales in the first quarter of 2009 (on a seasonally adjusted basis). This was an increase of 7.1 percent on the previous quarter and an increase of 56.0 percent on the same period a year ago.

This was made up of 1,579 compulsory liquidations (which are up 1.2 percent on the previous quarter and 43.6 percent on the corresponding quarter of the previous year), and 3,362 creditors voluntary liquidations (which are up 10.0 percent on the previous quarter and 62.5 percent on the corresponding quarter of the previous year).

Individual insolvencies

There were 29,774 individual insolvencies in England and Wales in the first quarter of 2009 on a seasonally adjusted basis. This was an increase of 1.6 percent on the previous quarter and an increase of 19.0 percent on the same period a year ago.

This was made up of 19,062 bankruptcies (which were up 0.5 percent on the previous quarter and 23.4 percent on the corresponding quarter of the previous year), and 10,713 Individual Voluntary Arrangements (IVAs), (which were up 3.6 percent on the previous quarter and 11.8 percent on the corresponding quarter of the previous year).