Recession Fuels Big Rise In Financial Crime

The number of company directors being pursued through the courts has surged in the last year as the government cracks down on fraud and tax evasion.

Lawyers said court actions aiming to have directors "struck off" increased by 31% in the year to 31 March. A director can be banned from holding office for up to 15 years or held responsible for a company's losses. They may even face prosecution in the criminal courts.

The research, by the City law firm Wedlake Bell, showed the number of "disqualification proceedings" started against companies jumped from 820 in the previous year to 1,079, with 1,852 individuals facing a ban. The most common reason is underpayment of tax, but the research found a 72% increase in disqualification because of criminal activity.

The figures suggest Revenue & Customs is taking a harder line, as it chases directors of 403 companies for underpayment of tax – a 14% increase on the same period a year ago.

The economic downturn has seen a sharp rise in UK business failures with the number of insolvencies increasing by a fifth to 15,535 in 2008. In tandem with this, the data reveals a sharp increase in financial crime, with directors of 91 companies facing disqualification for criminal activity, such as fraud or theft – a 72% increase.

Edward Starling, head of rescue and restructuring at Wedlake Bell, said: "The increase in disqualification cases being launched over the last year is huge and should sound alarm bells for directors of struggling companies that the fulfilment of their obligations could be scrutinised."