Recommendation 9

HM Government · verbatim extract Not Addressed

In all administrations, the administrator is under a statutory obligation to prepare a report about the conduct of the directors prior to the administration. This report must be submitted through the Director Conduct Reporting Service managed by the Insolvency Service within 3 months of the entry into administration. Where a director’s conduct makes them unfit to be a director of a company and it is expedient in the public interest to do so, the Insolvency Service, on behalf of the Secretary of State, can seek an order from the court disqualifying a director from acting as such for up to 15 years. Separate criminal investigations may also be undertaken where evidence of criminality is uncovered. disqualification where it can be identified that the director’s misconduct has caused losses to creditors. Payment of compensation from a director is sought by way of disqualification compensation order from the court. This compensation can be for the benefit of a specific creditor or class of creditors or a contribution to the company’s assets. As with disqualification, compensation can be obtained from a director by way of an undertaking in lieu of a court order. The Insolvency Service can confirm that a conduct report was submitted by the administrators of Avro Energy Ltd in accordance with their statutory obligations. As the contents are confidential, no further comment can be made on the report which the 4 Responses to the Committee’s Third Report of Session 2022–23 Insolvency Service will consider, along with any other relevant information, when deciding whether it is appropriate to seek disqualification and compensation orders against any of the directors of Avro Energy Ltd. Additionally—and separate from the Secretary of State’s power to seek disqualification and compensation orders against directors—insolvency office-holders, such as administrators, have powerful tools to clawback funds that have been inappropriately removed from a company prior to its insolvency. Where a particular creditor has been paid its debt in preference to other creditors, or where an asset has been sold for significantly less than its value, the office-holder may apply to the court to seek to reverse the transaction. no reasonable prospect that it could avoid insolvent administration—what is known as ‘wrongful trading’ —administrators may take action against them to recover the additional losses caused by wrongfully trading. The administrators of Avro Energy Ltd have informed the Insolvency Service that their investigations into legal claims that may be brought in the interests of creditors continue. These matters are ongoing, active and confidential.