Insolvency Service Criminal Investigations – Frequently Asked Questions

What is a criminal insolvency investigation?

A criminal insolvency investigation is an investigation into potential criminal offences related to insolvency. This can include fraud, theft, and other financial crimes. The Insolvency Service, a government agency, has the power to investigate both individuals and companies that have been involved in insolvency proceedings.

Who can be investigated?

The Insolvency Service can investigate anyone who has been involved in the management of a company that has gone into insolvency. This includes directors, shareholders, employees, and third parties who have had dealings with the company.

What are the types of offences that can be investigated?

The Insolvency Service can investigate a wide range of offences related to insolvency, including:

• Breach of Director Disqualification Order: This is where an individual previously disqualified as a director continues to act in the capacity of a director in contravention of a disqualification order or undertaking.
• Acting as a director whilst an individual is an undischarged bankrupt, or is subject to a bankruptcy restrictions order or undertaking.
• Fraudulent trading: This is where a company continues to trade when it knows that it is insolvent and that it is unlikely to be able to pay its debts.
• Wrongful trading: This is where a company continues to trade when it knows that it is insolvent and that it is likely to cause its creditors significant losses.
• Theft: This is where a director or employee of a company steals money or assets from the company.
• False accounting: This is where a director or employee of a company falsifies the company’s accounts in order to deceive creditors.
• Money laundering: This is where a person launders the proceeds of crime through a company.

How does a criminal insolvency investigation start?

A criminal insolvency investigation can start in a number of ways, including:

• A complaint from a creditor or member of the public.
• A referral from another law enforcement agency, such as the Police or the Serious Fraud Office.
• A referral from other Government departments such as Companies House or the Information Commissioner’s Office.
• The Insolvency Service’s own intelligence gathering.

What happens during a criminal insolvency investigation?

The Insolvency Service will gather evidence to support the allegations of criminal wrongdoing. This evidence can include:

• Company records and accounts.
• Witness statements.
• Financial statements.
• Electronic communication evidence such as emails, text messages, and social media activity.
• CCTV footage.

The Insolvency Service may also interview suspects under caution.  This is usually on a voluntary basis as the Insolvency Service investigators do not have powers of arrest (unless the allegations are so serious that the police are tasked by the Insolvency Service to effect an arrest).

What happens at the end of a criminal insolvency investigation?

The Insolvency Service may decide to take no further action, or it may decide to prosecute the suspects.  If the suspects are prosecuted, this will result in criminal court proceedings.  If found guilty, depending on the nature of the allegations, they could be sentenced to imprisonment, a fine, or both.

What are the penalties for criminal insolvency offences?

The penalties for criminal insolvency offences vary between offences but can be severe.  For example, the maximum sentence for breaching a director disqualification order is 2 years imprisonment, or the maximum sentence for fraudulent trading is 10 years imprisonment.

What should I do if I am under investigation for a criminal insolvency offence?

If you are under investigation for a criminal insolvency offence, it is important to seek legal advice as soon as possible. A lawyer can help you to understand the investigation, protect your legal rights, and look to build your case from the outset by pro-actively challenging the allegations against you.

We hope this FAQ article has been helpful. If you have any further questions, please do not hesitate to contact us.

Click here to view our Insolvency Service Criminal Investigations service page.