Liquidation and the Director: How a Decade of Data Has Re-Shaped Personal Risk in UK Insolvency

Why this matters now

For most of the 2010s, the orthodoxy among UK directors and their professional advisers was that, provided basic record-keeping and tax-payment hygiene were in place, the personal consequences of a corporate liquidation were limited. The company failed; the director, in most cases, did not.

A decade of data tells a different story. Three structural changes — the long tail of Bounce Back Loan enforcement, HMRC's restoration as a preferential creditor in December 2020, and the maturing of the third-party litigation funding market — have converged to make personal liability a routine, rather than exceptional, feature of the modern UK insolvency landscape. The probability of any single director being disqualified or sued remains a minority outcome, but the tail risk has thickened materially, and the cost when it crystallises has risen.

This article reviews what the public record actually shows. It draws on the Insolvency Service's monthly company-insolvency releases, its annual Enforcement Outcomes statistics, HMRC and HM Treasury policy papers, recent appellate authority, and the audited results of Manolete Partners plc, the UK's only listed insolvency-claims funder. It is written for directors and the accountants who advise them.

1. The volume picture: liquidations are running at a 30-year high

Headline UK company insolvency volumes (England & Wales, registered companies) over the past decade show a clear post-pandemic step-change.

Three features stand out. First, the 2023 total of 25,158 was the highest annual figure recorded since 1993. Second, Creditors' Voluntary Liquidation has become overwhelmingly dominant: CVLs accounted for between 77% and 90% of all corporate insolvencies in every year since 2020. Third, compulsory liquidations are climbing back to pre-pandemic levels, with the 3,730 recorded in 2025 the highest since 2012 — a direct reflection of HMRC's renewed willingness to petition.

Set against that, the population of active UK companies has roughly doubled in a decade, from around 3.0 million in 2014 to 4.9 million at the end of September 2025. The insolvency rate in 2024–25 stood at approximately 52 per 10,000 active companies — elevated, but well below the 113 per 10,000 peak of the 2008–09 recession.

The corollary, however, is that one director in roughly 191 active companies will be involved in a corporate insolvency this year. That is the universe from which the personal-liability cases that follow are drawn.

2. Director disqualification: volumes, drivers and the Bounce Back Loan effect

The Insolvency Service publishes annual disqualification statistics under the Company Directors Disqualification Act 1986 (CDDA). Volumes are modest in absolute terms but have shifted dramatically in their composition.

Three observations matter. Disqualifications are still well below the levels of the early 2010s, when annual totals routinely exceeded 1,500. The dominant misconduct category has flipped from "unfair treatment of the Crown" — principally unpaid PAYE and VAT — to abuse of COVID-era financial support schemes, overwhelmingly the £47 billion Bounce Back Loan programme. By April 2025 the Insolvency Service had recorded more than 2,000 BBL-related disqualifications, alongside 343 bankruptcy restrictions and 54 criminal convictions, with over £6 million in compensation orders made.

Average ban length has lengthened from around five and a half years pre-pandemic to a current mean of eight years, with BBL cases averaging 9.4 years and roughly one in five disqualifications now exceeding ten years. The administrative "undertaking" route under section 1A CDDA still accounts for 83–88% of disqualifications; only 12–17% proceed to a contested court order.

The conduct-report sieve

Under section 7A CDDA every office-holder must file a director conduct report on every director of an insolvent company, within three months of the insolvency event, regardless of whether misconduct is suspected. The Insolvency Service's Director Conduct Reporting Service receives approximately 25,000 such reports each year. Against around 1,000–1,200 disqualifications, roughly 3–5% of reported directors are ultimately disqualified. The reassurance for the well-advised director is that disqualification is statistically rare; the warning is that every CVL and every compulsory liquidation triggers a formal conduct review.

Compensation orders under section 15A CDDA

Section 15A, inserted into the CDDA by the Small Business, Enterprise and Employment Act 2015 and in force from 1 October 2015, allows the Secretary of State to apply for an order requiring a disqualified director to pay compensation — either to identified creditors or as a contribution to the company's assets. The first such order, in Re Noble Vintners Ltd; Secretary of State v Eagling [2019] EWHC 2806 (Ch), required the disqualified director to pay £559,484 — £460,067 to 28 named creditors and £99,417 to the company estate.

The regime then lay largely dormant. Between November 2019 and February 2023 only one further order and 29 undertakings were obtained. The position changed sharply once BBL casework began to mature: 90 compensation orders or undertakings worth £2.8 million were made in 2023/24, rising to 118 instruments worth £3.6 million in 2024/25. Secretary of State v Barnsby (Re Pure Zanzibar Ltd) [2023] EWHC 2284 (Ch) confirmed that section 15A is not limited to dishonesty and reaches negligent or reckless conduct causing creditor loss.

3. Civil claims by liquidators: the toolkit and the cases that matter

Beyond the public-enforcement regime sits the office-holder's own armoury of civil claims against directors under the Insolvency Act 1986. There is no central public dataset of these claims, but the case law of the last five years has been unusually active.

Misfeasance — section 212 IA 1986

Section 212 is a procedural mechanism allowing a liquidator (or, with leave, a creditor or contributory) to seek summary relief for breach of fiduciary duty, misapplication of company property or any other misfeasance by a director or officer. The remedy is in the court's discretion under section 212(3).

The defining recent authority is BTI 2014 LLC v Sequana SA [2022] UKSC 25, in which the Supreme Court confirmed the existence of the so-called "creditor duty": directors' duties under section 172 of the Companies Act 2006 require them to consider, and where insolvent liquidation becomes inevitable to give effect to, the interests of creditors. The duty engages when directors know or ought to know that the company is insolvent or bordering on insolvency, or that insolvent liquidation is probable. Sequana did not invent the duty, but it crystallised its content and timing.

The largest practical illustration to date is Wright v Chappell; Re BHS Group Ltd [2024] EWHC 2166 (Ch), where the High Court held the directors of the BHS group liable for over £110 million in "misfeasant trading" — a novel formulation drawing on the Sequana duty — plus a further £18 million for wrongful trading. The decision is, on the public record, the largest wrongful trading award ever made by an English court and the first to recognise an "insolvency-deepening" misfeasance claim independent of section 214.

The companion authority Re System Building Services Group Ltd [2020] EWHC 54 (Ch) confirms that directors' fiduciary duties survive entry into administration or CVL; they run in parallel with those of the office-holder rather than being extinguished.

Wrongful trading — sections 214 and 246ZB IA 1986

Wrongful trading liability arises where, at some point before the commencement of insolvent liquidation or administration, a director knew or ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation, and did not thereafter take "every step" reasonably available to minimise loss to creditors. The standard under section 214(4) is hybrid — objective (the reasonably diligent person carrying out that function) plus subjective (the actual knowledge, skill and experience of the director). The contribution ordered is compensatory, not penal.

Section 246ZB extends the regime to administrators, and section 246ZD (a 2015 reform) permits office-holders to assign wrongful trading, fraudulent trading, transactions at undervalue, preference and section 423 claims to third-party funders.

The line of authority — Re Produce Marketing Consortium (No. 2) [1989] BCLC 520, Re Continental Assurance [2001] BPIR 733, Brooks v Armstrong (Re Robin Hood Centre) [2016] EWHC 2893 (Ch), Re Ralls Builders [2016] EWHC 1812 (Ch) and now Re BHS — shows the cause of action moving from a notoriously difficult claim, often defeated on causation, to one that is being pursued at scale and with reduced evidential reluctance. Practitioner commentary still describes section 214 as historically underused; that characterisation is beginning to look dated.

Importantly, the Corporate Insolvency and Governance Act 2020 temporarily neutralised wrongful trading liability for any worsening of the company's position during the periods 1 March – 30 September 2020 and 26 November 2020 – 30 June 2021. That window is now closed, and trading during it remains assessable under the parallel duties of misfeasance and the Sequana creditor duty.

Fraudulent trading — section 213 IA 1986 and section 993 CA 2006

Section 213 imposes civil contribution liability where any person was knowingly party to carrying on the business with intent to defraud creditors or for any fraudulent purpose. Section 993 of the Companies Act 2006 mirrors it as a criminal offence carrying up to ten years' imprisonment, applying whether or not the company is in liquidation. The standard is actual dishonesty involving real moral blame (Re Patrick & Lyon [1933]).

Two recent Supreme Court decisions have widened the reach of section 213. Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23 confirmed its extra-territorial application and dismissed the ex turpi causa defence against a company seeking to recover from its own directors' fraud. Bilta (UK) Ltd v Tradition Financial Services Ltd [2025] UKSC 18 held that section 213(2) extends to "outsiders" — third-party counterparties who knowingly participate in or dishonestly assist the fraudulent business — not only to insiders. The practical effect is that liquidators can now pursue brokers, professional advisers and connected third parties on a footing once reserved for directors themselves.

Transactions defrauding creditors — section 423 IA 1986

Section 423 sits apart from the other antecedent-transaction provisions because it is uncapped: there is no statutory "relevant time" window, no requirement that the company be in formal insolvency, and standing is open to any victim of the transaction, not just an office-holder. The test is subjective: did the transferor enter into the transaction at an undervalue with the purpose of putting assets beyond a creditor's reach or otherwise prejudicing them?

Invest Bank PSC v El-Husseiny [2025] UKSC 4 (affirming [2023] EWCA Civ 555) confirmed a broad interpretation: section 423 reaches transactions in which a debtor causes a company under his control to dispose of the company's assets at an undervalue, thereby diminishing the value of his shares. The decision substantially widens the practical utility of the section as a tool for both office-holders and individual creditors confronted with asset-stripping arrangements that fall outside sections 238–239.

Preferences and transactions at undervalue — sections 238 and 239 IA 1986

These are the workhorses of liquidator antecedent-transaction recovery. Section 238 captures gifts and significantly under-priced transactions in the two years prior to the onset of insolvency. Section 239 captures payments or grants of security that improved a particular creditor's position, where the company was influenced by a desire to produce that effect, in the six months before onset (two years for connected persons, with a presumption of desire). Both require insolvency at the time, or as a result, of the transaction. They are deployed routinely in CVLs and administrations following the SIP 2 investigations every office-holder must conduct.

4. Litigation funding has industrialised director claims

The single most reliable public proxy for the scale of director civil-claim activity is Manolete Partners plc, the AIM-listed UK insolvency-claims funder. Its disclosed numbers tell the story.

Manolete reports a money multiple consistently around 1.9x and an average case duration of 13 months. Henderson & Jones, Augusta and other funders sit alongside it in a market that simply did not exist on this scale a decade ago. The statutory enabler is section 246ZD of the Insolvency Act 1986, which from October 2015 permitted office-holders to assign or sell wrongful trading, fraudulent trading and antecedent-transaction claims. The economic enabler is the funder appetite that has filled the funding gap historically described in the Continental Assurance line of cases.

The headline implication: directors of liquidated companies can no longer rely on the financial constraints of the estate as an effective shield against pursuit. A modest but well-evidenced claim that an in-house liquidator might once have closed unprosecuted is now routinely the subject of a funder bid.

5. HMRC has built — and is now using — a personal-liability toolkit

The 2020 Finance Act marked a structural shift in HMRC's posture toward directors. Three changes matter.

Restored preferential creditor status (1 December 2020). From the start of December 2020 HMRC ranks as a secondary preferential creditor for "relevant deductions" — VAT, PAYE income tax, employee NIC, student loan deductions and Construction Industry Scheme deductions. The TIIN projected approximately £185 million per year in extra recovery at steady state. HMRC's 2023/24 accounts report £162 million received in insolvency dividends across all HMRC debt. For floating-charge lenders and unsecured creditors, the practical effect has been a sharp reduction in dividend prospects, and a corresponding increase in the economic pressure on office-holders and funders to pursue directors directly.

Joint and Several Liability Notices (Finance Act 2020, Schedule 13). Effective for accounting periods ending on or after 22 July 2020, JSLs allow HMRC to render directors, shadow directors and certain participators jointly and severally liable for the company's tax debts in three scenarios: (a) where tax avoidance or evasion is involved; (b) where there has been repeated insolvency and non-payment — i.e. phoenixism; and (c) where the recipient has facilitated avoidance or evasion. The TIIN projected an Exchequer impact rising to about £20 million per year at steady state. HMRC does not routinely publish issuance statistics, and the substantive case law is still nascent, but the regime is now in the standard toolkit of any HMRC tax investigation involving a corporate at risk.

A renewed willingness to petition. HMRC winding-up petitions, suspended through the pandemic moratorium, have rebounded. Quarterly petition volumes ran in the low hundreds in 2022, climbing to 630 in Q3 2024 and 1,069 in Q1 2025. October 2025 alone produced 423 HMRC petitions — the highest monthly count since October 2024 — with HMRC accounting for around 46% of all High Court winding-up petitions in 2023. The 3,730 compulsory liquidations recorded in 2025 are the visible output of that posture.

The older personal-liability provisions still bite

Three pre-2020 mechanisms remain regularly used.

Personal Liability Notices for unpaid NIC under section 121C of the Social Security Administration Act 1992 transfer Class 1 NIC liability to a director where non-payment is attributable to the director's fraud or neglect. The civil standard of proof applies and the burden is on HMRC.

Officer penalty attribution under paragraph 19 of Schedule 24 to the Finance Act 2007 allows HMRC, where a company is liable to a penalty for a deliberate inaccuracy, to specify a portion of that penalty (up to 100%) for which a director is personally liable. The leading authority is Hackett v HMRC [2020] UKUT 212 (TCC), in which a personal liability notice of approximately £13 million on the sole director of Intekx Ltd was upheld and HMRC's discretion to proceed civilly rather than criminally was endorsed.

The Kittel principle (Mobilx Ltd v HMRC [2010] EWCA Civ 517; Megtian Ltd [2010] EWHC 18 (Ch)) allows HMRC to deny input VAT recovery where the trader knew or ought to have known that the transaction was connected with fraudulent VAT evasion. The denial is company-level, but the deliberate-inaccuracy penalty that often follows feeds directly into Schedule 24 paragraph 19 attribution.

Notices of Requirement to give security for VAT, PAYE or NIC, the Managed Service Company transferable-debt regime in Chapter 9 of the Income Tax (Earnings and Pensions) Act 2003 (extended by Christianuyi Ltd v HMRC [2019] EWCA Civ 474), and the corporate offences of failure to prevent the facilitation of tax evasion in the Criminal Finances Act 2017 complete the toolkit. The first prosecution under the 2017 Act — of Bennett Verby Ltd, in August 2025, in connection with alleged R&D tax credit fraud — signals a willingness, eight years on, to translate the corporate offence from statute book to court room.

6. Reading the numbers honestly

It is important not to overstate the position. On any reasonable reading of the data, the median UK director whose company enters CVL or compulsory liquidation will not be disqualified, will not be sued by the liquidator, and will not be subject to an HMRC personal-liability notice. Disqualification follows roughly 3–5% of conduct reports; civil claims, on the imperfect public evidence available, are a minority outcome; HMRC personal-liability instruments are issued in volumes measured in the hundreds, not thousands.

What has changed is the composition and severity of the tail. A director with a clean record of compliance, accurate filings, careful management of the Sequana moment when insolvency becomes a real possibility, and prompt engagement with HMRC and with insolvency advice when distress emerges, is not the target of any of the regimes described above. A director who has misapplied a Bounce Back Loan, has continued to take dividends or salary as insolvency closed in, has paid connected creditors in preference to the general body, or who has presided over deliberate VAT inaccuracies, faces a materially higher risk than they would have in 2014 — longer bans, larger compensation orders, more aggressive HMRC pursuit, and a maturing market of well-funded liquidators willing to litigate.

The two structural messages for accountants advising directors are simple. The point at which insolvency duties engage is earlier than many directors assume, and the public record of the past three years makes that increasingly difficult to argue otherwise. The cost of waiting until the company has actually entered formal insolvency before seeking advice has risen, both because the conduct-report regime captures every case, and because the litigation funders behind today's liquidators have changed the economics of pursuit.