A recent R3 report indicated that bad management and incompetence was to blame for 57% of corporate insolvencies while nearly 40% of business could have been rescued if professional advice had been sought earlier.
With almost 60% of Insolvency Practitioners already believing that the UK Insolvency regime is overly forgiving towards directors who fail this is surely not going to change their opinions
It has been speculated that cost cutting at the Insolvency Service the agency of BIS that deals with company investigations and disqualifications will be as high as 40% of its annual budget. This is obviously going to lead to them focusing on the management of the ever increasing personal and corporate insolvency caseloads and moving away from the costly, time consuming investigation work. This will ultimately lead to many more directors who ought to be investigated and possibly disqualified falling through the net and allowing them the opportunity to repeat there mistakes and put further creditors and jobs at risk.
A possible solution to this problem may be to introduce stricter punishments for directors of failed companies such as a three strike your out policy. For example if you have three company failures over your lifetime you are automatically debarred from being a director or being involved in the management of a company for 10 years. No investigation just a straight 10 year ban.
This might make directors take a tighter grip of there companies, identify any problems and look for solutions a lot sooner.
So if cost cutting is required to help reduce the government deficit then by increasing the penalties for directors who fall foul of the rules this may counter affect any potential loss of belief in the disqualification procedure and remind directors that they can’t get away with any mismanagement.
Recent research carried out by R3 the Insolvency trade body into the attitude of young and old people to debt has found the following
* 36% of 18-24 year olds would rather bury their heads in the sand than deal with debts compared to 9% of 55-64 year olds
* A staggering 26% do not even open their bills compared to 10% of over 65 year olds
* 28% try to avoid contact with people they owe money to. This is 11% for over 65s
* 30% do not even know who to contact for help compared to 8% of over 65s
* 44% of all ages still believe that you have to pay for debt advice.
Has the time now come to demand that the government change the National Curriculum so that financial planning and money management are an essential part of a child’s education?
By the time they leave school children should know how to budget, how to save and what they can do if it all goes wrong.
Also it might be worthwhile to provide additional education to those under 25s who have suffered from debt problems so that they don’t make the same mistake in the future.
Maybe it is now time also for the financial institution to be more proactive on how they lend to the young. Have reduced credit limits or capped limit. Reward those who pay off there credit each month and remove facilities for those who pay the bare minimum so they can not rack up large debts.
By teaching the next generation about how to deal with there finances better and that credit be used in proportion to a person’s income it should hopefully lead to less long term financial problems.
What do you think?