Insolvency Service Investigations
Our team is sensitive to the fact that an Insolvency Service investigation can have a significant disruptive impact on the operation of a company. We aim to minimise the risk of reputational damage and provide practical cost-effective solutions for our corporate and individual clients.
If you have received correspondence from the Insolvency Service regarding an investigation or you have been served with a search warrant, our team of expert insolvency solicitors can be contacted for confidential and discrete advice.
Got a question?
The powers of the Company Investigations department of the Insolvency Service derive from the Secretary of State for the Department of Business, Energy and Industrial Strategy under the Companies Act 1985 (‘the Act’).
Investigations can be instigated by a complaint made directly to the Company Investigations department of the Insolvency Service by another company, member of the public or information provided by another investigating body (such as the Financial Conduct Authority).
The company under investigation will not be notified of the investigation at the outset. The Insolvency Service will open an investigation into the company and look into the subject matter of the complaint without initially contacting the company.
The company usually becomes aware of the investigation either as a result of correspondence received from the Insolvency Service or when a search warrant is executed at the company premises.
Under section 432 of the Act, the Secretary of State can appoint an inspector(s) to investigate the affairs of a company if it appears that the company is being conducted:
- With the intent to defraud creditors or the creditors of any other person
- For a fraudulent or unlawful purpose
- In a manner which is unfairly prejudicial to some part of its members or where any actual or proposed act or omission of the company is or would be so prejudicial
- Where persons concerned with the company’s formation or management have been guilty of fraud, misfeasance or other misconduct towards members
- Where company members have not been given all the information which they might reasonably expect
Production of Documents and Information
Section 447 of the Act provides the Secretary of State may direct, or the investigator so authorised by the Secretary of State may give directions to a company/or any other person to produce documentation or information required.
This power is not restricted for use against the company directors but can also be directed towards any person connected with the company.
Section 448 of the Act provides a search warrant can be obtained if there are reasonable grounds for believing:
- There are on any premises, documents where production has been required but which have not been produced
- An offence has been committed for which the penalty on conviction on indictment is imprisonment for a term of not less than two years and there is documentation on any premises relating to whether the offence has been committed
- That if production was so required, the documents would not be produced but would be removed from the premises, hidden, tampered with or destroyed
For more information on the procedure for the execution of search warrants, please visit our Dawn Raids Page here.
Company Investigators may also seek to obtain information by interviewing company directors, senior management, employees and others connected to the company.
There are a number of possible outcomes of an Insolvency Service investigation including:
No Further Action
The investigation may show that there is no need for any action.
If it is in the public interest, the Insolvency Service can make an application to the High Court for the company to be wound up.
If the Insolvency Service deem the conduct of directors to be unfit, it can instigate director disqualification proceedings against them. If successful, the disqualification period will range from 2 years to 15 years.
The instigation of criminal proceedings is also an option. The information obtained as part of the investigation may be passed by the Insolvency Service to other prosecuting authorities or regulatory bodies to investigate such as the FCA, SFO or HMRC.
The directors or the company may be given a warning notice to improve its conduct.
The consequences of failing to cooperate with the Insolvency Service investigation can lead to potentially serious consequences including:
Contempt of Court
If the investigation is frustrated by the directors or other company personnel, they can be found in contempt of court, fined, imprisoned and ordered to pay costs.
Intentionally obstructing a warrant or, without reasonable excuse, failing to comply with any requirements imposed, create a separate criminal offence which can result in a fine if convicted on indictment and a fine up to the statutory maximum on summary conviction.
Our experienced team takes a proactive approach to Insolvency Service investigations and any ensuing civil or criminal proceedings.
We are able to field a team of civil and criminal law insolvency specialists to assist you.
We are experts in insolvency investigations and we work in conjunction with the leading barristers and KCs in the country in this specialist area of law.
The areas we can assist you with include:
- Advice and assistance upon receipt of correspondence from the Insolvency Service
- Immediate representation and attendance at any dawn raid and execution of a search warrant to ensure the investigators do not exceed their powers of search and seizure
- Advice on challenging the basis and legality of a search warrant
- Liaising and negotiating with the Insolvency Service on your behalf
- Representation at interviews and meetings with the Insolvency Service
- Representation in any ensuing civil proceedings such as director disqualification proceedings
- Representation in any ensuing criminal proceedings such as a prosecution for serious fraud or regulatory breaches