By Max Clarke

The number of disqualification orders imposed on directors of insolvent companies jumped another 4% last year to 1,437, up from 1,388 the year before, according to City law firm Reynolds Porter Chamberlain LLP (RPC).

The number of disqualification orders was up a substantial 23% compared to five years ago, when there were just 1,173 orders. A total of 6,422 directors have been disqualified in the last five years.

Disqualification orders ban directors of insolvent companies from being directors of or taking part in the creation or promotion of a limited company for up to 15 years. They are applied for by the Government’s Insolvency Service and approved by the courts if sufficient grounds can be established- such as theft, fraud, continuing to trade while the company is insolvent, or failure to keep proper accounting records.

“Disqualification orders can have a long-lasting impact on the director’s ability to set up a new business — it is undoubtedly career threatening for directors,” said Jonathon Davies, Partner at RPC.

Company insolvencies peaked in Q3 2009, so the increase in disqualification orders could be a result of the high number of company failures in the continued downturn. Davies continued:

“Liquidators and administrators look for someone to blame when there is an insolvency and they have been focusing on company directors. With so many insolvencies during the recession, the Government has been very busy in applying to the courts this year for disqualification orders.”

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