Commentary - Insolvency Service Enforcement Outcomes 2022/23

Question 1

1. Main Messages

Accepted Answer

During 2022/23, 932 directors were disqualified under the Company Directors Disqualification Act (CDDA) 1986 as a result of the work of the Insolvency Service. The number of director disqualifications in 2022/23 was higher than in 2021/22. Before the coronavirus (COVID-19) pandemic, the number of disqualifications had been stable at between 1,200 and 1,300 between 2013/14 and 2019/20. Lower numbers in the past three years coincided with historically low numbers of company insolvencies during the pandemic, along with the time gap between insolvency and the completion of investigations and subsequent proceedings.
The mean average length of director disqualification in 2022/23 was 7 years and 4 months. This is higher than in previous years and is linked to an increase in the number of disqualifications relating to COVID-19 financial support scheme abuse, which to date have tended to result in longer than average disqualification periods. In each of the previous ten financial years, the average length had been between 5 years and 5 months, and 6 years.
More than half of Section 6 director disqualifications in 2022/23 (459 out of 893) included an allegation relating to COVID-19 financial support scheme abuse. The second most common was the 185 allegations relating to ‘Unfair Treatment of the Crown’.
During 2022/23, 49 companies were wound up in the public interest. This was similar to numbers in the previous three financial years. Numbers of these orders declined followed a legislative change in 2016, which increased the number of regulatory and enforcement bodies to which the Insolvency Service could disclose material. In some cases, allowing disclosure to these additional bodies has been more effective than winding up the company.
During 2022/23, 250 individuals entered bankruptcy or debt relief restrictions orders and undertakings. This was a record low in the time series going back to 2009/10, down from the 319 in 2021/22. The lower numbers of restrictions orders and undertakings coincided with a fall in the number of bankruptcies during the same period to the lowest level for more than 30 years.
The mean average length of bankruptcy and debt relief restrictions in 2022/23 was 6 years and 4 months. As with director disqualifications, this is longer than in previous years and is linked to an increase in the number of restrictions relating to COVID-19 financial support scheme abuse, which to date have tended to result in longer than average restriction periods.
As at 31 March 2023, there were more than 6,200 former directors with active disqualifications and over 1,800 individuals subject to bankruptcy and debt relief restrictions.
During 2022/23, 69 individuals facing criminal charges brought by the Insolvency Service were convicted and none were acquitted. This was lower than last year, when courts were clearing a backlog linked to the COVID-19 pandemic, but is similar to 2019/20 (the most recent pre-pandemic financial year).
There were 178 separate outcomes in 2022/23 relating to criminal charges brought by the Insolvency Service. Seventy-three of these were financial orders, such as fines and cost orders. The next most common sentence types were 38 of immediate imprisonment and 37 community orders.

Question 2

2. Things you need to know about this release

Accepted Answer

The coverage of the statistics in this release differs throughout due to differences in legislation and policy across the United Kingdom. The geographic breakdown a particular series relates to is detailed throughout this commentary.

The numbers in this release are broken down by financial year, such that 2022/23 means the period from 1 April 2022 to 31 March 2023.

Further details can be found in the accompanying Methodology and Quality Document and Guide to Insolvency Service Enforcement Outcomes.

Question 3

3. Director Disqualifications

Accepted Answer

These statistics relate to individuals that have acted as the director of a company in Great Britain, or a company that has an interest in Great Britain and have been disqualified under the Company Directors Disqualification Act (CDDA) 1986 as a result of the work of the Insolvency Service. All underlying numbers for this section can be found in Worksheets 1-1d in the accompanying tables.

A director can be disqualified under different sections of the CDDA, depending on the circumstances:

Section 2 following conviction for an indictable offence in relation to the promotion, formation, management, liquidation or striking off a company;
Section 6 for unfit conduct in relation to an insolvent or dissolved company; or
Section 8 where it is considered expedient in the public interest.

Further details on director disqualifications and the restrictions imposed on disqualified directors can be found in the accompanying Guide to Insolvency Service Enforcement Outcomes.

3.1 Disqualification Orders and Undertakings

The Insolvency Service obtained, or had significant involvement in obtaining, 932 director disqualifications in 2022/23. Of these, 812 (87%) were undertakings and 120 (13%) were obtained by court order. The number of disqualifications in 2022/23 was 16% higher than in 2021/22 (804).

As shown in Figure 1, before the coronavirus (COVID-19) pandemic, the number of disqualifications had been stable at between 1,200 and 1,300 between 2013/14 and 2019/20. Lower numbers in the past three years coincided with historically low numbers of company insolvencies during the pandemic, along with the time gap between insolvency and the completion of investigations and subsequent proceedings.

In December 2021, the Insolvency Service gained powers to disqualify directors of dissolved companies following the enactment of the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021. The first disqualification using these powers was made in June 2022. During 2022/23, 25 directors of dissolved companies were disqualified.

Figure 1: After being stable between 2013/14 and 2019/20, director disqualification numbers declined during the coronavirus pandemic

Great Britain, 2009/10 to 2022/23

A line chart showing the number of director disqualifications each year between 2009/10 and 2022/23. The numbers can be found in Table 1 of the accompanying tables — Source: Insolvency Service

Most director disqualifications made as a result of the work of the Insolvency Service in 2022/23 were in relation to insolvent or dissolved companies (Section 6 of the CDDA). There were 893 disqualifications made under Section 6 (down from 752 in 2021/22). There were 24 disqualifications made under Section 8, and the Insolvency Service also made a substantial contribution to 15 disqualifications in 2022/23 made under Section 2. See Worksheet 1a of the accompanying tables for more information.

3.2 Length of Director Disqualification Orders and Undertakings

A disqualification order or undertaking is typically enforced for between 2 and 15 years (see Guide to Insolvency Service Enforcement Outcomes for further details). Figure 2 shows the average (mean) length of director disqualifications. In 2022/23 this was 7 years and 4 months. This includes disqualifications under Section 6 and Section 8 of the Act, along with Section 2 disqualifications which were a result of referral or significant input from the Insolvency Service.

Figure 2: The average length of director disqualifications increased in 2022/23, linked to an increase in the number of disqualifications relating to COVID-19 financial support scheme abuse

Great Britain, 2009/10 to 2022/23

A line chart showing the average length of director disqualifications each year between 2009/10 and 2022/23. The numbers can be found in Table 1b of the accompanying tables — Source: Insolvency Service

The average length of a director disqualification in 2022/23 was longer than in previous years. This is linked to an increase in the number of disqualifications relating to COVID-19 financial support scheme abuse, which to date have tended to result in longer than average disqualification periods. In each of the previous ten financial years, the average length had been between 5 years and 5 months, and 6 years.

Historically, the average length of orders has been longer than the average length for undertakings. A reduction in the length of the disqualification can be offered in certain circumstances if the director accepts an undertaking, in recognition of the earlier protection of the public and the costs saved from avoiding court proceedings.

However, in 2022/23 the average length of undertakings was longer than for orders, with undertakings having an average length of 7 years, 6 months, while orders had an average length of 6 years, 7 months. As with the overall increase in the average disqualification length, this is linked to the increase in the number of disqualifications relating to COVID-19 financial support scheme abuse. To date, nearly all such disqualifications have been undertakings rather than orders and the average length of disqualification for these cases has been longer than for most other allegations.

Of the 932 director disqualifications made in 2022/23, 249 (27% of the total), were for between 2 and 5 years, 507 (54%) were for over 5 and up to 10 years, and 176 (19%) directors were disqualified for over 10 up to 15 years. See Worksheet 1b of the accompanying tables for more information.

3.3 Active Disqualifications

A total of 6,244 directors who were disqualified in the past 14 years remained disqualified as at 31 March 2023. Additionally, there is likely to be a small number of directors with active disqualifications with lengths between 14 and 15 years that started before 2009/10, however the data from this period are unavailable.

Of the 1,386 disqualifications that came into force in 2009/10, 32 (2%) remained active, while more than half the disqualifications from 2018/19 and all of the disqualifications that came into force in 2021/22 remained active. See Worksheet 1d of the accompanying tables for more information.

3.4 Allegations in Director Disqualification Cases

The allegations shown here are in relation to disqualifications made under Section 6 of the CDDA only – director disqualifications made in relation to an insolvent or dissolved company. It is possible for more than one allegation to be made in each disqualification case. Therefore, the sum of the number of allegations presented here does not match the number of director disqualifications under Section 6 of the Act.

The allegations presented here relate to those disqualification orders and undertakings obtained in the year being reported on in this release, rather than the date the allegations were made. Further information on allegation types can be found in the Guide to Insolvency Service Enforcement Outcomes.

For the 893 disqualifications made under Section 6 of the CDDA in 2021/22, there were a total of 954 allegations recorded, as presented in Figure 3.

Great Britain, 2022/23

A bar chart showing the number of allegations of each type in director disqualification outcomes in 2022/23. The numbers can be found in Table 1c of the accompanying tables — Source: Insolvency Service

The most common allegation was in relation to COVID-19 financial support scheme abuse, which was associated with 51% of director disqualifications in 2022/23 (459 out of 893). In previous years, the most common allegation was ‘Unfair treatment of the Crown’ (which usually refers to HM Revenue and Customs (HMRC)). In 2022/23, this was the second-most common allegation, associated with 185 director disqualifications (21%). Unfair treatment of the Crown can range from cases where a director had made a conscious decision to pay other creditors and not HMRC, to cases where a director has defrauded or attempted to defraud HMRC.

Further information on all allegation categories listed in Figure 3 can be found in the Guide to Insolvency Service Enforcement Outcomes.

Question 4

4. Companies Wound Up in the Public Interest

Accepted Answer

These statistics relate to companies, including United Kingdom and foreign companies registered at Companies House, as well as companies that should be registered, as they carry out business in the United Kingdom. The compulsory winding up of a company is a legal process where the company is placed into compulsory liquidation by order of the court.

The companies wound up in the public interest as a result of enforcement action from the Insolvency Service make up only a small percentage of the overall number of companies that are placed into compulsory liquidation. Numbers of compulsory liquidations can be found in the monthly and quarterly insolvency statistics.

All underlying numbers for this section can be found in Worksheet 2 in the accompanying tables.

In 2022/23, 49 companies were wound up in the public interest. This was similar to numbers seen over the past four years, but low compared to historical levels (Figure 4).

Figure 4: The number of companies wound up in the public interest remained lower than pre-2016 levels

United Kingdom, 2009/10 to 2022/23

A line chart showing the number of companies wound up in the public interest each year between 2009/10 and 2022/23. The numbers can be found in Table 2 of the accompanying tables — Source: Insolvency Service

The number of companies wound up in 2011/12 included two major investigations resulting in 61 and 106 winding up orders.

In October 2016, the Companies (Disclosure of Information) (Specified Persons) Order 2016 came into effect. This added a further five regulatory and enforcement bodies to the statutory list of those to whom the Insolvency Service can disclose material relating to live investigations. This has widened the range of actions the Insolvency Service can take following a company investigation, allowing disclosure in instances where it was previously not possible. In some cases, it has been more effective to use these disclosure gateways than wind up the company. This may for example include working with Companies House to dissolve a company.

The number of companies wound up in the public interest is included in the total compulsory liquidation cases that are reported in the Insolvency Statistics and as such do not represent additional liquidations.

Question 5

5. Bankruptcy and Debt Relief Restrictions Orders and Undertakings

Accepted Answer

These statistics relate to people subject to a bankruptcy or debt relief order in England and Wales – formal insolvency procedures for individuals who have had problems with debt – where the individual is considered to be culpable. A restrictions order is made by the court after considering evidence submitted by the Official Receiver showing the individual to have been dishonest or blameworthy.

Bankruptcy and debt relief restrictions are presented together throughout this release. As there are very few debt relief restrictions made, it is not possible to draw conclusions from analysing them on their own. All underlying numbers for this section can be found in Worksheets 3-3c in the accompanying tables.

5.1 Restrictions Orders and Undertakings

In 2022/23, a total of 250 bankruptcy and debt relief restrictions orders and undertakings were made. This was a record low in the time series going back to 2009/10, and is 22% lower than the 319 in 2021/22. As shown in Figure 5, the recent lower numbers followed a period of stability from 2015/16 to 2019/20, during which the number of restrictions was between 435 and 485 in each year. Of the restrictions in 2022/23, 19 were restrictions orders (up from 11 in 2021/22) and 231 were restrictions undertakings (compared to 308 in 2021/22).

Figure 5: Numbers of bankruptcy and debt relief restrictions orders and undertakings reached a record low in 2022/23

England and Wales, 2009/10 to 2022/23

A line chart showing the number of bankruptcy and debt relief restrictions orders each year between 2009/10 and 2022/23. The numbers can be found in Table 3 of the accompanying tables — Source: Insolvency Service

The decline in the number of restrictions orders and undertakings since 2009/10 has been driven by the reduction in the number of individuals that have entered bankruptcy over the period. Bankruptcy numbers reached a 30-year low in 2022. More information on the trends and drivers of the number of individuals entering into formal insolvency procedures, including bankruptcy, debt relief orders and individual voluntary arrangements, can be found in the published Quarterly and Monthly Insolvency Statistics.

5.2 Length of Bankruptcy and Debt Relief Restrictions Orders and Undertakings

The length of time that a restrictions order or undertaking can be enforced ranges from 2 to 15 years. The average (mean) length of restrictions overall in 2022/23 was 6 years and 4 months, more than a year longer than in the previous year (Figure 6).

Figure 6: The average length of bankruptcy and debt relief restrictions increased in 2022/23, linked to an increase in the number of restrictions relating to COVID-19 support scheme abuse

England and Wales, 2009/10 to 2022/23

A line chart showing the average length of bankruptcy and debt relief restrictions orders each year between 2009/10 and 2022/23. The numbers can be found in Table 3a of the accompanying tables — Source: Insolvency Service

The average length of orders made in 2022/23 was 6 years and 7 months, up from 5 years and 4 months in the previous year, while the average length of undertakings was 6 years and 4 months, compared to 5 years and 2 months in the previous year. This increase is linked to an increase in the number of restrictions relating to COVID-19 financial support scheme abuse, which to date have tended to result in longer than average restriction periods. Before 2022/23, the average length of restrictions had largely remained stable since 2009/10.

In 2022/23, 50% of the 250 restrictions imposed were for between 2 and 5 years, whilst 42% were for more than 5 years and up to 10 years, and 8% were for restrictions of more than 10 years, up to 15 years.

5.3 Active Bankruptcy and Debt Relief Restrictions Orders and Undertakings

A total of 1,832 bankruptcy and debt relief restrictions orders and undertakings that began in the last 14 years remained in effect as at 31 March 2023. This does not include a small number of orders and undertaking still in effect that started before 2009/10 as data are unavailable.

On 31 March 2023, of the 1,945 bankruptcy and debt relief restrictions orders and undertakings that came into effect in 2009/10, six (less than 1%) remained active, 45% of orders and undertakings that came into effect in 2018/19 remained active, while 98% of orders and undertakings that came into effect from 2020/21 remained active. See Worksheet 3c of the accompanying tables for more information.

5.4 Allegations in Bankruptcy and Debt Relief Restrictions Cases

It is possible for more than one allegation to be made in each bankruptcy and debt relief restrictions case. Therefore, the total number of allegations presented here does not match the number of restrictions orders and undertakings.

The allegations presented here relate to those restrictions orders and undertakings made in the year being reported on in this release, rather than the date the allegations were made.

For the 250 restrictions orders and undertakings in 2022/23, there were a total of 268 allegations recorded, as presented in Figure 7.

Figure 7: The most common allegation made in bankruptcy and debt relief restrictions cases in 2022/23 was COVID-19 financial support scheme abuse

England and Wales, 2022/23

A bar chart showing the number of allegations of each type in bankruptcy and debt relief restriction orders outcomes in 2021/22. The numbers can be found in Table 3c of the accompanying tables — Source: Insolvency Service

COVID-19 financial support scheme abuse was an allegation in 101 of the 250 (40%) restrictions orders and undertakings made in 2022/23. The next most common allegation was ‘incurring debt without reasonable expectation of payment’ (41 cases), which was the most common allegation in the previous two years.

Question 6

6. Criminal Charge Outcomes

Accepted Answer

These statistics relate to individuals in England and Wales who have been charged with a criminal offence as a result of the work of the Insolvency Service or by other partner agencies within the Department for Business and Trade, for example Companies House, or directorates such as the Employment Agency Services Inspectorate. These statistics exclude criminal case outcomes for prosecutions for offences under Part 21 Companies Act 2006 relating to Information about People with Significant Control.

All underlying numbers for this section can be found in Worksheets 4-4c in the accompanying tables.

6.1 Criminal Prosecutions by Individual and Charges

In 2022/23, 69 individuals faced a total of 91 criminal charges (Figure 8). This was lower than last year, when courts were clearing a backlog linked to the COVID-19 pandemic, but is similar to 2019/20 (the most recent pre-pandemic financial year).

All individuals who faced charges in cases where the outcome was in 2022/23 were convicted. For full details, see Worksheet 4 of the accompanying tables.

Figure 8: The number of convictions in criminal charges by the Insolvency Service in 2022/23 was lower than in 2021/22

England and Wales, 2016/17 to 2022/23

A line chart showing the number of individuals and charges prosecuted by the Insolvency Service each year between 2016/17 and 2022/23. The numbers can be found in Table 4 of the accompanying tables — Source: Insolvency Service

6.2 Criminal Convictions by Penalty Imposed

There were 178 separate outcomes in 2022/23 (Figure 9). Seventy-three of these were financial orders, such as fines and cost orders. There were also 38 sentences of immediate imprisonment and 37 community orders.

Figure 9: Common penalties imposed in 2022/23 for charges brought by the Insolvency Service included immediate imprisonment, cost orders and community orders

England and Wales, 2022/23

A bar chart showing the number of each type of outcome for charges prosecuted by the Insolvency Service in 2022/23. The numbers can be found in Table 4a of the accompanying tables — Source: Insolvency Service

Multiple penalties can be imposed for the same charge, for example, combining a custodial sentence with a confiscation order and costs order. In some cases, the court may consider that no separate penalty is appropriate for a particular charge where the court has already sentenced on other matters.

Previous editions of these statistics included victim surcharge as a separate category. However, as this is an amount linked to other sentence(s) imposed, we no longer count it as a separate outcome.

6.3 Length and Size of Penalty Imposed

Figure 10 shows that in 2022/23, 38 sentences of immediate imprisonment were imposed. Nineteen of these sentences were for less than 12 months, thirteen were for between 12 and 24 months, and six were for more than 24 months. Thirty-seven community orders were imposed. Community orders vary, with examples including unpaid work and rehabilitation orders, so these can have durations of either hours or months.

Figure 10: Thirty-eight sentences of immediate imprisonment were imposed in 2022/23 for charges brought by the Insolvency Service, with lengths ranging from less than 12 months to more than 24 months.

England and Wales, 2022/23

A stacked bar chart showing the lengths of each type of sentence for charges prosecuted by the Insolvency Service in 2022/23. The numbers can be found in Table 4b of the accompanying tables — Source: Insolvency Service

Figure 11 shows that there were 73 financial orders made in 2022/23, with the most common type (38) being cost orders. Half of cost orders (19) were for more than £1000. The remaining financial orders consisted of 29 fines and 6 other financial orders.

Figure 11: There were 73 financial orders made in 2022/23, including 29 for values in excess of £1,000

England and Wales, 2022/23

A stacked bar chart showing the monetary values of each type of financial penalty for charges prosecuted by the Insolvency Service in 2022/23. The numbers can be found in Table 4c of the accompanying tables — Source: Insolvency Service

Question 7

7. Data and Methodology

Accepted Answer

7.1 Data Sources

Data are compiled from a range of administrative databases and spreadsheets held by the Insolvency Service. Details of the data sources are provided in the accompanying Enforcement Outcomes Methodology and Quality document.

7.2 Methodology and data quality

Detailed methodology and quality information for this statistical release can be found in the accompanying Enforcement Outcomes Methodology and Quality document.

The main quality and coverage issues to note:

The coverage of the statistics in this release differs throughout due to differences in legislation and policy across the United Kingdom. The geographic breakdown a particular series relates to is detailed throughout the commentary.
Enforcement outcomes are reported based on the date of the order or undertaking, rather than on the date it was recorded on the administrative system. In practice this means there is likely to be an element of under-coverage in the first release of new data.
These statistics report on enforcement outcomes obtained as a result of the work of the Insolvency Service. Therefore, any activity conducted outside of the Insolvency Service, or where the Insolvency Service has not had significant involvement, will be excluded.
Information presented on directors disqualified under the Company Directors Disqualification Act may not be consistent with information held by Companies House. Full reasons why are provided in the accompanying Enforcement Outcomes Methodology and Quality document.

7.3 Revisions

These statistics are subject to scheduled revisions, as set out in the Revisions Policy. Revisions tend to be made as a result of data being entered onto administrative systems after the cut-off date for data being extracted to produce the statistics. Such revisions tend to be small in the context of overall totals; nonetheless all figures in this release that have been revised since the previous edition have been highlighted in the relevant tables.

Question 8

8. Glossary

Accepted Answer

Definitions are provided below for key terms only. Full definitions, including for all allegations, can be found in the accompanying Guide to Insolvency Service Enforcement Outcomes document.

Term	Definition
Allegations	Grounds for Orders and Undertakings to proceed (for both director disqualifications and bankruptcy and debt relief restrictions orders).
Bankruptcy	A form of debt relief available for anyone who is unable to pay their debts. Assets owned will vest in a trustee in bankruptcy, who will sell them and distribute the proceeds to creditors. Discharge from debts usually takes place 12 months after the bankruptcy order is granted.
Bankruptcy and debt relief restrictions Order or Undertaking	A legal order from the court that extends the length of time an individual may be subject to bankruptcy or Debt Relief Order restrictions. This order can be applied for a number of reasons, lasting anywhere between two and 15 years. In most cases, it is applied due to reckless, dishonest and fraudulent behaviour. If the individual accepts the allegations, they may offer to enter into a bankruptcy or debt relief restrictions undertaking. This has the same effect as an order but does not involve court proceedings.
Companies Wound Up in the Public Interest	Following an investigation into the corporate abuse by a limited company or limited liability partnership, the Insolvency Service can apply to the court to have the company put into compulsory liquidation, with a liquidator appointed to investigate and wind up its affairs. Corporate abuse could include serious misconduct, fraud, scams or sharp practice in the way the company operates. Winding up in the public interest can be a powerful tool to disrupt fraudulent or criminal behaviour by removing the companies used to perpetuate the crimes.
Debt Relief Order	A form of debt relief available to those who have a low income, low assets and debt no more than a specified value. There is no distribution to creditors, and discharge from debts takes place 12 months after the DRO is granted. DROs were introduced in April 2009. A change in eligibility criteria was introduced from 29th June 2021 in which the upper limit of debt increased from £20,000 to £30,000. In addition, the threshold on the value of assets that a debtor can hold and be eligible to enter into a DRO increased from £1,000 to £2,000; the value of a single motor vehicle that can be disregarded from the total value of assets increased from £1,000 to £2,000; and the level of surplus income received by the debtor before payments should be made to creditors increased from £50 to £75 per month.
Director disqualification Order or Undertaking	Order made by the court under the Company Directors Disqualification Act 1986 (CDDA) to disqualify a person or a specified period, from becoming a director of a company, or directly or indirectly being concerned or taking part in the promotion, formation or management of a company without permission from the court. If an individual accepts the allegations made against them, they can offer to enter into a disqualification undertaking. This has the same effect as a director disqualification order but does not involve court proceedings.
Liquidation	Liquidation is a legal process in which a liquidator is appointed to ‘wind up’ the affairs of a limited company. The purpose of liquidation is to sell the company’s assets and distribute the proceeds to its creditors. At the end of the process, the company is dissolved – it ceases to exist.

Commentary - Insolvency Service Enforcement Outcomes 2022/23

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1. Main Messages

2. Things you need to know about this release

3. Director Disqualifications

3.1 Disqualification Orders and Undertakings

Figure 1: After being stable between 2013/14 and 2019/20, director disqualification numbers declined during the coronavirus pandemic