The new course of action aims to reduce the number of cases against delinquent directors which resulted in the disqualification of 1,540 UK directors last year.
Commenting on the problem Dr Howells stated:
“Frequently when companies fail and a disqualification order is made, directors have contributed to the collapse by their negligence, misconduct or misappropriation of company assets. Rogue directors will often ensure that there are insufficient assets to pay the costs of the liquidation and therefore frustrate recovery action.”
The Insolvency Service plans to set up a pilot scheme in which it will act with insolvency practitioners, solicitors, counsel and enquiry agents, collectively known as the Forensic Insolvency Recovery Service (FIRS).
The Insolvency Service will receive advice from FIRS in any legal action it brings to recover monies from directors who abuse the system.
Dr Howells explains that:
“This partnership between The Insolvency Service and the private sector will use existing legal mechanisms for recovery which have previously been underused because of lack of assets to fund legal proceedings. FIRS will operate on a no-win-no-fee basis with insurance or an indemnity to protect against possible adverse costs… The government sees effective enforcement as a vital part of its support of enterprise and entrepreneurship.”