Director disqualification: what directors and creditors need to know

Director disqualification is an interesting and, at times, controversial topic. In 2025/26, the Insolvency Service reported 1,158 director disqualifications in the UK. There were 23,752 corporate insolvencies in 2025 (excluding company voluntary arrangements (CVAs) as there is no requirement to report on directors’ conduct) and if we assume each company has two directors, that’s a total of 47,504 directors and a disqualification rate of 2.4%.

How would you feel if you were a creditor of a company which has just gone into liquidation, knowing there is only a small chance that the director(s) will be disqualified? Conversely, if you are a director of a company that has become insolvent, should you be reassured by the fact that the disqualification rates are low?

The statistics are admittedly imperfect – the 1,158 disqualifications in 2025 may relate to company failures which actually occurred in prior years (it can take a while to conclude a director disqualification) and there is no readily available data to confirm the total number of individuals who were directors of companies that failed in 2025 – but the above is an indication of the disqualification run rate. Using the same method for prior years, the figures are 2.2% in 2023 and 2.4% in 2024.

COVID-19 funding and HMRC debts dominate the picture

Most director disqualifications relate to unfit conduct, and particularly the misuse of monies received under the various COVID-19 financial support schemes (773 disqualifications) and misuse of Crown (ie HMRC) monies (119 disqualifications). If you are a director of an insolvent company, these are the two areas that give most cause for concern.

Prior to COVID-19, the misuse of Crown monies was the main reason for director disqualification. Creditors may feel that the focus on COVID-19 support abuse, and the perception that these cases are easier to pursue, has come at the expense of action against other misconduct. In my view, that concern has merit and other misconduct that leaves creditors out of pocket must not be overlooked.

There were three disqualifications relating to dissolved companies. That’s obviously not a significant number but since February 2022 the Insolvency Service has been granted more powers to review how companies have been dissolved, greater use of these could increase in the coming years. Directors should not assume that letting a company be struck off will put their conduct beyond scrutiny.

The consequences go beyond a ban

The use of compensation orders has increased. The Secretary of State can apply for an order requiring a disqualified director to pay compensation. So far, this has predominantly related to recovering misused COVID-19 monies. In 2023, 90 compensation orders and undertakings had a total value of £2.8m. In 2024, there were 118 with a total value of £3.6m, and in 2025 the figures rose to 125 and £4.5m respectively. Directors can face not only disqualification but also a significant compensation liability, especially if the disqualification relates to misuse of COVID-19 monies.

A director who finds himself on the receiving end of disqualification proceedings clearly needs to seek advice at the earliest possible opportunity. Not all director disqualification proceedings are contested. Around 85% are agreed consensually with the balance being decided by way of a court order. Going to court can also add to the costs.

When it comes to the length of time a director is banned, for those cases relating to misuse of COVID-19 monies the average length of director disqualification is just over nine years, with an average of eight years for other such disqualifications. Prior to COVID-19, such bans were, on average, only five and a half years.

Having a strong and robust insolvency regime is important for the UK economy and creditors need to have confidence that the conduct of errant directors will be properly investigated and due action taken. A fully resourced Insolvency Service is key to achieving these aims and in my opinion would be welcomed by the insolvency profession.