Insolvency cheats may face 15-year ban

by John d'Arcy



Directors who deliberately exploit the bankruptcy laws to cheat their suppliers, subcontractors, and operatives out of monies due may face a 15-year ban under legislative proposals now being considered by the Government.

Stephen Byers, Secretary of State for Trade and Industry, signalled a review of the bankruptcy laws earlier this year.

He said the main aim of the exercise is to encourage "responsible risk-taking" and to remove "the stigma associated with honest failure." But Byers pledged to crack down harder on the insolvency cheats.

The move has been welcomed by both employers and unions who have been angered by the activities of so-called "phoenix firms" that spring up swiftly from the ashes of enterprises that have gone into bankruptcy leaving a trail of unpaid debts.

Byers said it was estimated that 7-12 per cent of bankrupts were culpable in that they deliberately set out to mislead or deceive. He intended to consult on the possibility of differentiating between bankrupts who had been simply unfortunate and those guilty of unacceptable behaviour.

Byers added that he was hoping to introduce some other important amendments to the insolvency law as soon as possible. They included the possibility of a rescue period for companies in trouble. The DTI and the Treasury were also carrying out a joint review of company rescue mechanisms looking at longer term options for reform.