insolvency service director criminality

Insolvency service cracks down on criminality by directors

Authored by Phil Meekin

Phil Meekin

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Approximate read time: 3 minutes

The insolvency service has recently released figures which show the high levels of director disqualification relating to illegal activity over the last year. From April 2016 to January 2017, 106 directors were disqualified for employing illegal workers, with 88% of those receiving disqualifications for six years or more.

Employing illegal workers

These 106 directors employed 398 illegal workers between them, with food, leisure and hospitality, being the sectors most affected. All disqualified directors were fined a significant amount and banned from being company directors.

An important part of the insolvency service is investigating the conduct of directors whose companies have entered into administration or liquidation. The conduct of the three years before insolvency will be looked into, and this is backed up by legislation changes which took place in 2015, allowing the insolvency service to remove and prevent unfit directors from heading a company for up to 15 years.

Since April 2016, the 106 directors disqualified for employing illegal workers attempted to use insolvency procedures to shut down their businesses to avoid the fines placed on them by Home Office Immigration Enforcement (HOIE). Doing so would have left their creditors out of pocket. As a result, the directors were not only disqualified but also heavily fined.

Insolvency Service’s criminal enforcement team

The rise of this sort of behaviour, from employing illegal workers to attempting to use loopholes in the insolvency and legal systems, has led to the insolvency service employing a dedicated criminal enforcement team.

These 90 criminal enforcement investigators, prosecutors and law clerks from the Legal Services Group of the Department for Business, Energy and Industrial Strategy (BEIS) are responsible for investigating and prosecuting company and insolvency legislation breaches.

This new team will help the insolvency service to further tackle financial wrongdoing, which is a major focus of the service to help boost economic growth in the UK. Removing rogue directors and shutting down illegally run businesses will help law-abiding businesses, which financially, are being put on the back foot.

Directors who employ illegal workers rarely pay PAYE and National Insurance contributions, as well as paying lower wages which gives them an unfair advantage over competitors. This scalping on employment costs makes it much harder for job seekers looking for legitimate employment on a fair wage.

Some of the team’s successful work to date includes last year’s prosecution of a former city trader who hid assets from the Official Receiver. He was ordered to pay a confiscation order worth more than £2 million, with £500,000 of that money going to his creditors as compensation.

The new team works with HOIE, Companies House and the Employment Agency Standards Inspectorate to investigate directors, businesses and cases which cause concern. If you have any complaints or concerns regarding director misconduct or limited companies, you can report this on the insolvency services’ gateway.

In summary

From April 2016 to January 2017, 106 directors were disqualified and fined for employing illegal workers. To tackle the issue of directors employing illegal workers, The Insolvency Service has set up a new criminal enforcement team, made up of 90 investigators, prosecutors and law clerks. They aim to close illegal business employing illegal workers, and who are likely to pay below the minimum wage and not make PAYE and National Insurance contributions.

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