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Consultation: Corporate Civil Enforcement Reforms

R3 is seeking member views to inform its response to the Government’s consultation on modernising the corporate civil enforcement regime, including proposed reforms to the director disqualification regime. These proposals aim to better reflect the scale and nature of corporate misconduct and fall into three key areas:

  1. Structural reforms: accelerating enforcement processes, enabling quicker action against those responsible for corporate abuse, and strengthening protections for the public and the marketplace.
  2. Information‑gathering powers: enhancing the ability to obtain the information needed to support effective and efficient investigations into corporate abuse.
  3. Procedural changes: modernising the director disqualification process to make it more efficient and responsive.

Members are encouraged to complete this survey, which should take approximately 30 minutes. Further detail on each proposal can be found in the consultation document linked above.
Business As Usual
1.Would reforming civil powers help the Insolvency Service tackle a wider range of misconduct? Please explain your answer.
2.How could the Government raise directors’ awareness of the civil enforcement regime to prevent misconduct, without legislative change?
Proposal 1: Requirement to disqualify as a result of a company being wound up on public interest grounds
3.In what circumstances should a director be able to appeal their disqualification? Please explain your answer.
4.Does this proposal balance the need to act quickly to protect the public, whilst treating directors fairly? Please explain your answer.
5.The proposed length of disqualification would be a set period of 5 years. Is this appropriate? If not, what do you think it should be? Please set out your reasoning.
Proposal 2: Directors Restrictions
6.Do you support the introduction of a director restrictions regime to address low-level misconduct? Please explain your answer.
7.Is 3 years a suitable timeframe for a restriction? If not, what should it be?
8.What other types of misconduct should be considered for inclusion in the restrictions regime?
9.Do you think that restrictions provide sufficient weight to deter negligent behaviour? Please explain your answer.
10.Are there additional restrictions you think should be considered to protect the public and prevent repeat misconduct? Please explain your answer.
11.Should there be consequences for any co-director if an individual breaches their restrictions? Please explain your answer.
12.Does this proposal provide sufficient opportunity for directors to challenge the decision to apply restrictions? If not, what else should be done?
13.What are your views on offering a post insolvency educational course as an alternative to placing restrictions on a director? Please explain your answer.
14.Please provide any thoughts you may have on the following:

a. What should the aims of post insolvency director education be?

b. What types of content should be included?

c. How should education be delivered?

d. Who should deliver the education?

e. How should it be funded?

f. How should outcomes be measured?
Proposal 3: Secretary of State to replace court as decision maker for disqualification
15.Would the proposed system effectively improve the current court-based system? Please explain your answer.
16.Should appeals against a decision to disqualify be heard in the First-tier tribunal? If no, please provide reasons and alternatives.
17.Are there circumstances where you believe a tribunal-based approach would not be appropriate? Please provide details.
18.Does the proposed system give a fair way for directors to appeal/challenge disqualification? Please explain your answer.
Proposal 4: Ensuring fair distribution of a company’s assets upon insolvency
19.Will reversing the burden of proof by making the recipient demonstrate to the liquidator or administrator that the transaction was for value increase the effectiveness of these powers for the benefit of creditors? Please explain your answer.
20.How might reversing the burden of proof improve corporate governance and company conduct overall? Please explain your answer.
21.Should there be a presumption that a company is insolvent when a preference is made to a connected party? If possible and appropriate, please share examples or evidence of how the market is currently acting, or to demonstrate how this will work in practice
22.Have you used, or tried to use, the extortionate credit provisions? If possible and appropriate, please share examples
23.What, if any, are the unintended consequences on businesses of the above proposal?
24.Should section 244 Insolvency Act 1986 be revised to allow ‘commercially disproportionate’ (or similar wording) transactions to be challenged in the court? Please explain your answer.
25.How might ‘legitimate’ rescue finance be affected by this change? Please explain your answer.
26.Should the legislation be amended to make it clear that misfeasance actions against shadow directors of companies in liquidation are possible? Please explain your answer.
27.Is there any doubt about the application of other sections of Chapter X Insolvency Act 1986 to shadow directors? Please explain your answer.
Proposal 5: Company directors disqualification for failure to comply with HMRC securities legislation
28.Should the courts have the power to disqualify a director for failing to comply with HMRC securities legislation? If not, please explain, considering the need to protect public funds and maintain market integrity.
29.Do you think a single summary conviction is an appropriate threshold for director disqualification, or should a higher threshold apply? Please share your views on how best to balance effective deterrence with fairness in setting the threshold for director disqualification.
30.What do you consider to be the main risks or unintended consequences of introducing this power and how might these be mitigated to protect both the Exchequer and legitimate businesses?
Proposal 6: Expansion and legal clarification of examination powers for live companies
31.Should the Secretary of State’s powers under section 447 Companies Act 1985 be clarified to explicitly require any person to respond to investigators’ questions? Please explain your answer.
Proposal 7: Modernisation of disclosure gateways
32.Should the Insolvency Service review the section 447 Companies Act 1985 disclosure framework? Please explain your answer setting out the positives and negatives of the current framework.
33.How can the Insolvency Service best balance the need for confidentiality with the requirement for transparency and accountability in investigations under section 447 Companies Act 1985? Please explain your answer.
Proposal 8: Expand powers to allow investigators to seek additional information before bringing disqualification action under section 8 Company Directors Disqualification Act 1986
34.Should the Secretary of State have the power to request additional information from directors of solvent companies before initiating disqualification proceedings under Section 8 Company Director Disqualification Act 1986? If no, please explain your answer.
35.Should, as proposed, the powers mirror those in section 7(4) Company Directors Disqualification Act 1986? If no, please explain your answer.
36.Are there any limitations or safeguards you think should be included? If yes, please explain your answer and, if possible, provide suggestions.
37.Do you believe the proposed powers would improve the effectiveness of director disqualification investigations? Please explain your answer.
38.Should the proposed clarification in proposal 6 be replicated in section 7(4) Company Directors Disqualification Act 1986 and for section 8 Company Directors Disqualification Act 1986 disqualifications? Please explain your answer.
Proposal 9: Procedural changes
39.Do you think these are the right changes to make to the procedural rules to ensure timely and effective action can be taken? Please explain your answer.
40.How else might the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 be changed to improve the disqualification procedure? Please explain your answer.
Proposal 10: Introducing flexibility for the court procedure used for disqualification proceedings
41.Should disqualification proceedings have the flexibility to follow either Part 7 or Part 8 of the Civil Procedure Rules, depending on the nature of the case? If no, please explain why.
42.If answering yes to above question - in your view, what types of disqualification cases would be appropriate for using the Part 7 procedure (e.g. cases involving complex or disputed evidence)? Please provide examples or reasoning.
Proposal 11: Extension of the limitation date for certain cases
43.Are these the right factors for determining if a case is complex? If not, please explain why and provide alternatives/additions.
44.Is 5 years the appropriate timeframe for this measure? If not, what should it be?
45.Is it appropriate for the Secretary of State to make the decision of what constitutes a complex case? If no, please explain why and if possible, suggest an alternative decision maker.
Considered Impacts
46.What evidence is available to suggest what the technological costs would be to banks to accommodate the restrictions measure? Please explain your answer.
47.What evidence is available to suggest what proportion of directors would successfully appeal against proceedings under the new process? Please explain your answer.
48.What evidence is available to suggest what would be the legal cost, on average, under the new system for directors who successfully appeal? Please explain your answer.
49.Question 49: If you have any equality related concerns for any proposals in this consultation:

a. Which proposals raise concerns? and

b. What are your concerns?