Insolvency Education as a Preventative Measure

Insolvency education for directors is a difficult subject matter to raise with anyone. I came across a recent article that talked about Vince Cable wanting to tighten up on ‘dodgy’ director practices. The call for theshutterstock_377905594practices of these directors to be further investigated will be very difficult to achieve when the long-suffering Insolvency Service’s own resources are constantly restricted due to budget cuts.

Keeping irresponsible and often criminally negligent directors from doing further damage

The insolvency service provides an invaluable but often undervalued service to business keeping irresponsible and often criminally negligent directors from doing further damage. My role as a business turnaround consultant is to rescue directors and/or the business and in the vast majority of cases, directors are a very hard working and responsible sector of the general public.

There are, however, exceptions to every rule and we do receive Insolvency Service alerts and a cursory review of the last fifteen or so alerts concerning directors ban involved failing to keep proper records. When a company gets in debt it is easy to forget the creditors who are owed the money, but when creditor debts are not even recorded, this leaves me speechless. This attitude of not bothering to keep any records also leaves me wondering how on earth the Insolvency Service can investigate this kind of company. It must be simple enough to identify that a director does not present the company documents – he doesn’t have any. How though does the Insolvency Service Investigators investigate what has happened within the company in detail? It must be terribly time-to consume, having to request bank statements directly from the bank and go through every payment and receipt – if of course there are any?

There are clearly poor quality directors around as in all walks of life there are poor leaders, managers, retail assistants, etc, but there is a difference between being incompetent and those directors acting with criminal intent for their own benefit. For those criminal elements, no amount of education will help, but to minimise those who are just incompetent – wouldn’t a government sponsored training brochures/pamphlet be useful?

Why not provide a mini-booklet outlining roles, responsibilities and a simple glossary of businesses terminology. Yes, some may go straight in the bin, so why not go one step further and provide online knowledge testing centres to keep ongoing costs down, similar to a driving test? Sounds balmy, right? Well, it could be made more attractive by those have passed the test being allowed to have some kind of government accreditation on their website. At least you would know the person you are dealing with has the rudimentary essentials in business – just a thought I had.

On another level, this would hopefully reduce the amount of incompetence out there in the SME world and help to reduce a number of start-up closures in the first twelve months of trading. A large percentage of the UK’s population appears to not even know what the word “insolvency” means. Who knows, it may even help the Insolvency Sector by helping to prevent insolvency, not simply addressing it when it happens. 

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