The Insolvency Service is an executive agency of the Department for Business, Energy and Industrial Strategy (BEIS). It is headquartered in London, with 20 regional offices across England and Wales and employs around 1,700 people. The agency is led by chief executive, Dean Beale, who was appointed in November 2020.

The Insolvency Service provides public services to those affected by financial distress or failure and has a mission is to “deliver economic confidence by supporting those in financial distress, tackling financial wrongdoing and maximising returns to creditors. 

What are the Responsibilities of The Insolvency Service?

The agency has numerous responsibilities and these include:

  • Authorising and regulating members of the insolvency profession
  • Administering compulsory company liquidations and personal bankruptcies
  • Investigating companies in cases off misconduct and dealing with enforcement, such as the disqualification of directors
  • Making redundancy payments to eligible ex-employees where a business is insolvent from the National Insurance Fund
  • Administering and investigating those who are bankrupt and subject to debt relief orders
  • Acting as liquidator – known as the Official Receiver – when a private sector insolvency practitioner has not been appointed
  • Acting as nominee and supervisor in fast-track individual voluntary arrangements (IVA)
  • Advising BEIS ministers and other government departments and agencies on insolvency, redundancy and related issues
  • Acting as an impartial source of information for the public on insolvency and redundancy matters
  • Investigating and prosecuting breaches of company and insolvency legislation and other criminal offences on behalf of BEIS.

 What Powers does The Insolvency Service have?

The Insolvency Service has a significant range of powers to investigate companies that are both in liquidation and still trading, where it believes there may be financial or other misconduct.  In 2017, the BEIS Criminal Enforcement Team transferred to the Insolvency Service. The Insolvency Service’s Criminal Enforcement Team is the country’s main criminal enforcement agency for insolvency related fraud 

It may be informed of potential fraud or misconduct by an insolvency practitioner or a member of the public, who could be a creditor or an investor.and corporate misconduct and can prosecute cases that are referred by other agencies such as Companies House.

Section 432(2) of the Companies Act 1985 allows the Insolvency Service to commence an investigation on a number of grounds and these include if a company is believed to have defrauded creditors, known as fraudulent trading. Another reason is  if it has failed to keep accounting records and has withheld important information on the way it is being run, or if individuals are acting as directors when disqualified.

In addition, The Insolvency Service also has powers that are granted by a number of laws, including the Companies Act 2006, the Insolvency Act 1986 and the Company Directors Disqualification Act 1986.

The Insolvency Service does not need to disclose reasons for starting an investigation and its probe can bring in other parties, such as a company’s bank, solicitors and accountants. 

What Must Directors do if Investigated by The Insolvency Service?

Directors must comply with requests for information if The Insolvency Service conducts an investigation. This includes meeting officers conducting the investigation, providing them with assistance and producing documents and records, which is included under Section 434 of the Companies Act.

Failing to comply, could mean this is reported to a court and have an influence on any further prosecution or action taken against directors.

What are Possible Outcomes of Insolvency Service Investigations?

There are a range of possible outcomes that could result from an Insolvency Service investigation.

The best one for directors is if it is found there is no reason for concern and so they will be informed that no action will be taken. In some cases, the Insolvency Service can issue a warning to a business and its directors and tell them to improve their conduct.

In more serious cases and if it is believed to be in the public interest, the Insolvency Service can have the company wound up in court, which will prevent it trading.

If directors are culpable, then the Insolvency Service can disqualify them from managing a business for a period of up to 15 years. Prosecutions can occur in court and may also be passed on to another regulatory body if it is felt they may have more appropriate powers, such as the Financial Conduct Authority or the Competition and Markets Authority.