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Directors’ disqualification: insolvency practitioners and the decision-making process

Published online by Cambridge University Press:  02 January 2018

Sally Wheeler
Sally Wheeler*
Affiliation:
Business and Society, University of Leeds
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Extract

The Company Directors Disqualification Act 1986 (CDDA) instituted, inter alia, a mechanism whereby directors of failed companies can be disqualified from holding office in the future as the result of an application to the court by the Secretary of State, or in the case of compulsory liquidators, the official receive and a subsequent finding by the court that the director is unfit. The operation and effect of the CDDA has been the subject of speculation in the national press, other media and comment from insolvency practitioners since its inception. Most of this comment has focused on the role of the DTI and on its perceived failure to take steps to disqualify directors in sufficient numbers.

Type
Research Article
Information
Legal Studies , Volume 15 , Issue 2 , July 1995 , pp. 283 - 305
Copyright
Copyright © Society of Legal Scholars 1995

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References

1. A disqualification order under the CDDA 1986 extends considerably further than simply preventing company directorship. Under s 1(1) a person who is the subject of a disqualification order cannot, without the leave of the court, obtainable by application under s 17(l), be involved in the promotion, management or formation of a company, or hold office as an administrator or liquidator for the period of the disqualification order.

2. See CDDA 1986 s 7(1).

3. There is a large amount of academic literature, some notable examples are: V Finch ‘Disqualifying Directors: Issues of Rights, Privileges and Employment’ (1993) 22 I L J 35, D Millman ‘Personal Liability and Disqualification of Company Directors: Something Old, Something New’, (1992) NILQ 1, J Dine ‘Disqualification of Directors’ (1991) 12 Co Law 6 and V Finch ‘Disqualification of Directors' A Plea of Competence’ (1990) 53 MLR 385.

4. See for example, the Daily Telegraph (1991), 19 February, p 23, The Independent (1990) 15 July, p 23 and the Daily Telegraph (1990) 24 September, p 27.

5. Analysis, BBC Radio 4, 24 June 1994.

6. See for example S Hill ‘Disqualification of Directors: in for a penny…?’ The Insolvency Practitioner, Spring-April 1991 and P Martin ‘Loud Enough Bark, Precious Little Bite’ Accountancy April 1991. For a brief riposte to the concerns of the insolvency practitioners and credit managers voiced here see P Chillery ‘Company Directors Disqualification Act 1986 - Sinking or just weathering the storm’ The Insolvency Practitioner, Winter 1991.

7. HMSO 907, 20 October 1993. Despite the attention described here, the report was the first qualitative study of the operation of the CDDA. The Report was based on discussions with staff at the Insolvency Agency, the Society of Practitioners of Insolvency and the Institute of Directors, an analysis of documents held at the agency and surveys conducted with randomly selected company directors and insolvency practitioners.

8. In summary these were that the monitoring of the work of Official Receivers should continue to attempt to eliminate variations and achieve a more equitable distribution of caseloads; that the Agency should improve its processing of cases; that it should raise with the Lord Chancellor's Department to ensure a speedy hearing of disqualification applications; that it should work with Companies House to ensure that there is an accurate register of disqualified directors; and finally that it should take steps to promote greater awareness of the disqualification legislation among company directors.

9. See, for example The Financial Times (1993) 20 October, p 12, The Guardian (1993) 20 October, p 20 and The Independent (1993) 20 October, p 23.

10. Part 6 para (e) of the summary and conclusions.

11. See, for example (1994) Times, 13 February, p 28.

12. The list of paragraph numbers given in the report to support the 50% figure (paras numbered 1.6. 2.7.2.8 and 4.7-4.9) refer either to the general rise in insolvencies in recent years or to the examination of the practice of official receivers in relation to compulsory insolvencies.

13. The number of compulsory insolvencies in 1987–88 was 3,667 and in 1992-93 9,542. The number of voluntary insolvencies for the same years was 11,438 and 26,827.

14. The figure for voluntary liquidations includes, of course, instances where companies have resolved to liquidate for reasons unconnected with insolvency and so the directors have been able to make the statutory declaration of solvency required under the Insolvency Act 1986, s 89. Likewise the figure for compulsory liquidations includes winding-up orders made under IA 1986, s 122(1) generally and not just for inability to pay debts under s 122(1) (f). However it is unlikely that these heads detract substantially from the total figures and the ratio of one to another.

15. As a result of the Insolvent Companies (Reports on Conduct of Directors) Regs No 2 1986, (SI 1986/2134) an insolvency practitioner has to report on the conduct of every director whose company is involved in an insolvent liquidation.

16. See para 3.10.

17. 102 reports submitted between April and June 1992 were selected by the National Audit Office.

18. The DTI is currently conducting a review of the work of official receivers in compulsory liquidations with a view to contracting out their work to the private sector once the court has made the winding-up order and a decision is expected in July 1995. The idea seems to be that case administration will be undertaken by the private sector and investigation work will be left to the official receiver. It remains to be seen whether in practice this is a viable distinction or whether in fact liquidation work is an integral, indivisible function. If the DTI decides to move in the direction of contracting out, then the work of official receivers could be brought within the ambit of the Deregulation and Contracting Out Act 1994 by Order. A report in July 1994 commissioned by the Insolvency Service from Stoy Hayward recommended only that contracting out to the private sector in the form of Insolvency Practitioners was the preferred option and that that should be market tested, the report did not recommend any particular legislative approach or detail. Although the distinction between compulsory and voluntary liquidation as to state involvement of the private sector in both processes would go some way towards eliding the differences between them.

19. The company initiates the winding-up procedure by passing a resolution to liquidate. Creditor involvement occurs if the directors are unable to make a declaration of solvency under IA 1986 s 89 as the liquidation is then deemed to be a creditors' voluntary winding-up.

20. The term reflexive here is coined from M Hammersley and P Atkinson Ethnography, Principles in Practice (2nd edn) (Routledge, London, 1994) p 152–53. It is used to describe an interview designed to cover a series of issues rather than standardised questions in a standardised format. The attraction of reflexive interviewing is that interviewees are more likely to give the interviewer access to their ‘unique way of defining the world’: N Denzin The Research Act in Sociology, (Buttenworths, London, 1970) p 125.

21. It would be naïve to assume that even in a reflexive interview the presence of the interviewer does not influence the interviewee. Observation is then very important to establish an interpretative context for the analysis of interview data. See the discussion of interview data in D Silverman Interpreting Qualitative Data (Sage, London, 1993) p 90 ff.

22. It was not the case that interviews necessarily preceded observation. The basic frame of inquiry was established during a pilot study in 1991, described in S Wheeler ‘Disqualification of Directors: A Broader View’ in Rajak H (ed), Insolvency Law and Theory and Practice, (Sweet and Maxwell, London, 1993) but in line with the general approach of interactionist inquiry, the interview schedule was tested against considerable observation. See for example B Glassner and J Loughlin Drugs in Adolescent Worlds: Burnouts to Straights. (St Martin's Press, New York, 1987).

23. Miller explains the importance of enriching traditional ethnographic methodology and subsequent data analysis with perspectives that are offered by ethnomethodology, conversation analysis and Foucauldian discourse analysis, see G Miller Toward Ethnographies of Institutional Discourse’ (1994) 23 J of Contemp Erhnog 280.

24. CA 1948, s 188, see Dine op cit n 3 for an account of the legislative development of the concept of disqualification from 1948 onwards.

25. See for example D Marsh and R Rhodes Implementing Thatcherite Policies Open University Press Milton Keynes, 1992) and P Riddell The Thatcher Era, (1991, Blackwell, Oxford).

26. See D Marsh Privatization under Mrs Thatcher: a Review of the Literature’ (1991) 69 Public Administration 459.

27. See for example P Ainley and S Vickerstaff Transitions from Corporatism: the Privatisation of Policy Failure’ (1993) Contemporary Record 541.

28. See for example, S Pinch The restructuring thesis and the study of public services’, (1989) 21Environment and Planning 905 P Vincent-Jones ‘The Limits of Near-contractual Governance: Local Authority Internal Trading Under CCT’ (1994) 21 J of Law and Society 214.

29. For a detailed analysis of this movement in relation to the services sector of the economy in particular, see S Lash and J Urry Economies of Signs and Space (Sage, London, 1994) esp pp 193–210.

30. See for example the sentiments expressed in the Conservative Party pamphlet, Small Business, Big Future, p 3, ‘It has rarely been as difficult to start or expand a business…as a result those indispensable qualities of imagination, enterprise and drive are being stifled… The aim must be [that]…men and women of independent spirit will…use their skill and enthusiasm to start…profitable enterprise’.

31. A glowing account of the opportunities for fledgling entrepreneurs offered by Thatcherism is provided by I Stelzer ‘What Thatcher wrought’ (1992) 107 The Public Interest, 18 at p 32 ff. Stelzer comments on the percentage increase in the number of self-employed people in the employed labour force to 12% during the Thatcher years and the variety of schemes that were introduced to encourage self-employment. For a more reasoned account of economic, human and institutional factors which pressed upon the individual at this time see K Keasey and R Watson Small Firm Management (Blackwell, Oxford, 1993)p 80–88.

32. Rewarding endeavour was not the whole story behind the emphasis placed upon the small business form. The Small Business, Big Future pamphlet states that ‘the small fm provides a better environment for the employee than is possible in most large firms’. The small enterprise was perceived as having a role in the management of the labour force. For a critique and empirical evaluation of this see A Rainie Small Firms, Big Problems: the Political Economy of Small Businesses’ (1985) 25Capital and Class and D Goss ‘Social Harmony and the Small Finn’ (1988) 36 SOC Rev 114.

33. See J Freedman ‘Small Businesses and the Corporate Form: Burden or Privilege?’ (1994) 57 MLR 555 at 561 where the author reports that, in an empirical survey of small incorporated firms, 50% of respondent directors gave prestige and credibility as the reason for incorporating. This was the most popular reason after limited liability status.

34. See R Scase and R Goffee The Real World of the Small Business Owner (Croom Helm, Aldershot, 1980) esp ch 1.

35. This is especially true of areas such as family policy and welfare provision, for an overview of the area see M Loney et al The Stare or the Market (Sage, London, 1991) and N Deakin The Politics of Welfare (Methuen, London, 1987).

36. ‘Small business are the very embodiment of a free society… The freer the society, the more small businesses there will be. And the more small businesses there are, the freer and more enterprising that society is bound to be’, Conservative Political Centre (1984) Small Today, Bigger Tomorrow.

37. The lack of any detail on the number of sole traders and partnerships established during the Thatcher years makes a real figure for the number of ‘firms’ established hard to arrive at and so it is not possible to assess the impact of the ‘enterprise culture’ on these forms of business association.

38. According to information taken from figures produced by the DTI and published in Companies In in 1988-9 and 1992-3, there were 69,000 incorporations in 1980 and 112,000 in 1992, with a peak of 130,000 in 1989. There were 855,800 companies on the register in 1983 and 960,000 in 1993 with a peak of 1,031,900 in 1991.

39. Figures are, however, available to show that the percentage of public companies on the register for the period 1983-1993 has remained fairly constant at either just above or just below 1%.

40. Small companies are given a statutory definition (CA 1985, s 247) based on turnover and balance sheet thresholds and the number of employees for the purposes of abridged accounting and disclosure requirements. An elective regime which places small firms within certain thresholds, again based on turnover, outside the remit of the statutory audit is also available (SI 1994/1935).

41. Cmnd 9794 (1986), Building Business… Not Barriers, para 8.5.

42. See P Heelas and P Moms ‘Enterprise Culture: Its Values and Value’ in P Heelas and P Moms The Values of the Enterprise Culture (Routledge, London, 1992).

43. CDDA 1986 Sch 1 Part II.

44. The compensation system for investors introduced as a result of the Financial Services Act 1986 functions in a similar way. Payments made to the fund by firms offering financial services within the terms of the Act are reflected in the fees and commission charges levied on investors.

45. The disqualification unit is funded from a levy imposed on revenue realised from liquidations and paid into the Insolvency Services Account. This presents a ‘double whammy’ for creditors whose expected proceeds from distribution are decreased first by increased time costs levied by liquidators for dealing with the administration of disqualification reports and then by the levy.

46. The Insolvency Act 1986, s 214 introduced the concept of wrongful trading which is constructed as an action by the liquidator against the directors of the company using as evidence the fruits of the liquidator's investigation into the company failure. Disqualification was reserved as a state sanction because ‘[T]he two different functions are governed by different considerations. First, we do not wish to confer the public function on those who have no public finance with which to exercise it. Secondly, we do not wish to provide the means to use this essentially public function in support of private interests, as this would distort that function, reduce its effectiveness and place unfair burdens on directors. We should not underestimate the role…that malice and personal animosity might play in such matters’ (HL 21 March 1985, col 722). The idea that the cow could control applications for disqualification through a leave procedure was also rejected as too demanding on court time. The irony is that by creating this system of private policing and state enforcement, the public function was conferred in part on those with no public finance. Any detailed consideration of wrongful trading is beyond the scope of this article but it is worth noting in passing the study of McGee and Williams (ACCA 1992) reported in C Williams and A McGee ‘Curbing Unfit Directors - Is Personal Liability an Empty Threat’, Insolvency Lawyer, February 1993, 2 which showed the apparent failure of this new sanction for creditors.

47. There currently exists in draft form a Statutory Instrument (The Conditional Fee Agreements Order 1994) enacted pursuant to the Courts and Legal Services Act 1990 sec. 120(4), which will permit conditional fee agreements in certain circumstances. Such circumstances include ‘proceedings by a person…acting in the capacity of liquidator’. The impact that this will have on both wrongful trading applications and disqualification reports is hard to gauge. It will only assist in guaranteeing funds in situations where a director is known to have some assets capable of meeting a judgment. In cases where the directors appear to have no personal assets, or where an investigation is necessary to establish why the company failed and if the directors took money from it, finance for the investigation will still be required from creditors. I am grateful to Vanessa Finch of the LSE for drawing this development to my attention.

48. Some insolvency practitioners have publicly voiced their concerns about the system. For example, ‘If your house is burgled the policeman doesn't present you with a bill for investigating it - the disqualification unit should be an expense on public revenue’, (Steve Hill, an insolvency practitioner, reported in The Independent, 23 July 1993.).

49. Cmnd 8558, ‘Insolvency Law and Practice’, (1982) paras 735–736, 756–758.

50. See for example the investigative journalism of Stephen Aris both in his book Going Bust: Inside the Bankruptcy Business (Deutsch, London, 1985) and in a series of articles in the Sunday Times in April 1981.

51. See the biography of Kenneth Cork Cork on Cork (with H Barty-King) Macmillan, Basingstoke, 1988).

52. LA 1986, s 391(2).

53. IA 1986, s 392.

54. There is no explicit evidence that professionalisation through licensing was a tradeoff between the state and insolvency practitioners for the administration of the disqualification system. An inference that this might possibly be the case can be drawn from the Green Paper ‘Bankruptcy: A Consultative Document’ (Cmnd 7967) and the White Paper ‘A Revised Framework for Insolvency Law’ (Cmnd 9175), pre- and post-Cork respectively, which make it clear that the costs of a new stricter regime of insolvency were to be borne by the private sector. The idea of a trade-off between the state and the insolvency services sector fits the model of professionalisation put forward by Dingwall and Fenn which is that ‘professions…are occupational associations which have contracted with the state, not merely to regulate their own members but also to regulate the behaviour of others’: R Dingwall and P Fenn A Respectable Profession?’ Sociological and Economic Perspectives on the Regulation of Professional Services’ (1987) Int Rev of Law and Econ 51 at 61 ff.

55. See E Greenwood ‘Attributes of a Profession’ (1957) 2 Social Work 44 and the discussion of it in L Parker ‘Professional Accounting Body Ethics: In Search of the Private Interest’ (1994) 19 Accounting, Organizations and Society 507. Interestingly the same observation with regard to the speed with which the ornaments of professionalism were taken on board by the new insolvency profession has also been made with regard to the professional accounting bodies themselves: see H Willmott ‘Organising the Profession: A Theoretical and Historical Examination of the Development of the Major Accounting Bodies in the UK’ (1986) 11 Accounting, Organizations and Society 555.

56. In 1990 the Society of Practitioners of Insolvency was formed. The idea of the organisation was to act as an umbrella organisation for all the various disparate groups which represented different sectors of insolvency services providers.

57. For the importance of codes of ethics and entry standards to the model of professionalism see E Freidson Professionalism Reborn (Polity Press, Cambridge 1994) at p 169 ff. In fact the original fragmented structure of the insolvency services sector was such that separate ethical codes were established by the various bodies that professed an interest in insolvency. However in practice these codes are largely standardised.

58. See the empirical data referred to by T Halliday and B Curruthers in ‘The State, Professions and Legal Change: Reform of the English Insolvency Act 1977-1986’, ABF Working Paper 9019. However it was not just professionalism through licensing that gave insolvency practitioners an enhanced status. The Cork Committee Report (Cmnd 8558) and to a lesser extent the Insolvency Act 1986 gave prominence to the idea of the ‘rescue culture’ - the rehabilitation of businesses through the appointment of an administrator rather than dismemberment through liquidation or administrative receivership. Insolvency practitioners who were already high profile members of the accountancy profession were quick to promote their claims for competence, (eg (1992) Times, 21 May: ‘A case of conflict likely to redraw the guidelines of administration’). For a discussion of the adaption that takes place within professional culture to accommodate social change, see Y Dezalay ‘The Forum Should Fit the Fuss: the Economics and Politics of Negotiated Justice’, in M Cain and C Hanington, (eds) Lawyers in a Postmodern World (Open Univ Press, Milton Keynes, 1994) 155 at 157–172. By stating their claims to foster, shape and administer the rescue culture, these Insolvency Practitioners were able to bring their practices within the cannons of ‘professional’ knowledge. See W Goode ‘The Theoretical Limits of Professional Culture’ 266 at 277 ff in A Estioni (ed), The Semi-Professions and Their Organization (Free Press, New York, 1969).

59. The JIMU is a monitoring unit created by the largest three RPB to monitor compliance with the relevant legislation by insolvency practitioners.

60. The JIMU takes over its compliance function in the wake of a DTI report that in 1993/4 14 of the 160 insolvency licence holders inspected were in serious breach of the relevant legislation governing their conduct and many others were in breach to a lesser extent, see ‘DTI exposes breaches’, Accountancy, September 1994 p 14.

61. The JIMU can be seen as an extension of the JMU (Joint Monitoring Unit) which was set up by those of the professional accountancy associations which were accorded RPB status under the Financial Services Act (FSA) 1986. Radcliffe et al provide an interesting account of the change in function that pro-active monitoring by the JMU has brought about with respect to the RPB for the purposes of the FSA 1986, the view that accounting professionals who are the subject of this monitoring have of their own professional status and the way in which they perceive monitoring, (V Radcliffe et al ‘The Management of Professional Enterprises and Regulatory Change: British Accounting and the Financial Services Act 1986’ (1994) 19 Accounting, Organizations and Society 601 at 615 ff).

62. There is a growing literature on conceptions of professional culture and ethical behaviour within accountancy fms. See for example J Goetz The Effect of Accounting Firm Size and Member Rank on Professionalism’, (1991) 16 Accounting, Organizations and Society 159. Goetz finds in fact little evidence that suggests that more attention is given to ethical standards and professional culture within large firms. However Goetz's study was based around non-specific questions of self perception and conflicts with the findings of previous studies detailed therein.

63. Under IA 1986 s 164 it is an offence punishable by a fine for anyone to offer valuable consideration to a member or creditor of a company with a view to securing a nomination as liquidator. Under IR 4.150 the court has the power to disallow the remuneration of an insolvency practitioner in this position, whatever the wishes of the creditors. The ethical codes of the RPBs go further than this; see, for example, IPA Guide to Professional Conduct and Ethics 1990 para 2, which prohibits ‘the payment or offering of any commission…or furnishing of valuable consideration towards the introduction of insolvency opportunities’. This type of prohibition is viewed by some as a way of controlling the social composition of any given profession; only those from a particular background or employed in certain environments will find this rule non-restrictive: J Van Hoy ‘Intra Professional Politics and Professional Regulation’ (1993) 20 Work and Occupations 90 at 92 f.

64. The term ‘atrocity story’ is most often applied to an inter-professional or, more broadly, inter-group identity crisis, see for example R Dingwall Atrocity Stones and Professional Relationships’ (1977) 4Sociology of Work and Occupations 371 However they canother also be used as a way of establishing group identity per se: see, for example, S Hunt and R Benford ‘Identity Talk in the Peace and Justice Movement’ (1994) 22 J of Contemp Ethnog 488 at 499 f. This would appear to be the context in which they are used by insolvency practitioners. Indeed their use in this way has been noted before: see S Wheeler ‘Empty Rhetoric and Empty Promises: The Creditors Meeting’ (1994) 21 J of Law and Society 350.

65. The conduct reports on directors that have to be submitted to the Disqualification Unit are known as D reports. Unfit conduct is recorded on a D1 form and ‘clear’ conduct on a D3 form.

66. Under IA 1986, s 192 if a liquidation is not concluded within a year of appointment then a liquidator is obliged to report his progress to the Registrar of Companies.

67. ‘Starting-up’ refers to the practice of directors buying the stock and goodwill of the insolvent company and recommencing trading with a similar name from the same or nearby premises often with the same employees. It frequently requires the co-operation, passive or active, of the liquidator. It is one of the practices that the LA Act 1986 and the CDDA Act 1986 was intended to curb. The judgments of Millett J and Harman J in Re Keypak Homecare Ltd (1987) BCLC 409 and Re Keypak Homecare Ltd (No 2) (1990) BCLC 440 respectively provide an interesting judicial discussion of the problem.

68. Other studies have emphasised the need to situate the labels and consequences supplied by stereotyping in a broad system of relations. See on the one hand R Jeffrey ‘Normal Rubbish: deviant patients in casualty departments’, (1979) 1 Soc of Health and Illness 90 and on the other R Dingwall and T Murray ‘Categorization in Accident Departments: “Good” Patients, “Bad” Patients and “Children”’ (1983) 5 Soc of Health and Illness 127 which offers a considerably more extended set of relations as giving rise to the labels applied by stereotyping in their particular research setting.

69. The disqualification process sets up insolvency practitioners as the first filter of director conduct and the decision made as a result of that filter involves ‘the implementation of a legal mandate’ (Hawkins (ed) The Uses of Discretion (OUP, Oxford, 1992) p 11) and on that basis it seems to fall within the definition of a legal decision used by scholars examining the work of those operating in a regulatory capacity; see R Kagan ‘Inside Administrative Law’ (1984) 84 Col L R 816, J Gilboy ‘Deciding Who Gets In: Decision making by Immigration Inspectors’ (1991) 25 Law and Soc Rev 570; K Hawkins ‘On Legal Decision-Making’ (1986) 43 Washington and Lee LR1 161.

70. The choice of both terminology and approach in this section owes much to the thought provoking discussion of Goffman's Frame Analysis provided by P Manning and K Hawkins in their essay ‘Legal Decisions: a Frame Analytic Perspective’, in S Riggins (ed) Beyond Gown (1990) De Gruyter Berlin 203.

71. As Emerson and Paley point out most decision-makers place individual cases within a pre-mapped structure which reflects their concerns:’…the relevant horizons for most social control decision-makers will draw significantly upon knowledge of… practices and process…[Clases come to be processed within distinctively organizational horizons. This concept directs attention to decision-makers' use of background knowledge of the institutional sources, meanings and parameters of the cases that now require decision. Decision-makers… do not see and treat cases as self-contained, isolated entities, but rather as practical decision tasks…’ (R Emerson and B Paley ‘Organizational Horizons and Complaint-Filing’ at p 234, in K Hawkins, (1992) op cit n 69).

72. For an accessible exposition of the meaning of frame as used by Goffman see P Manning and B Cullam-Swan ‘Semiotics and Framing: Examples’ (1992) Semiorica 239 at 242–244.

73. Op cit n 41.

74. IA 1986, s 107.

75. As Whelan and McBarnet point out the traditional role of ‘polic[ing] the disclosure of corporate financial information’ undertaken by auditors has expanded considerably in recent years but at the same time firms undertaking audit work have expanded to offer a much wider package of services; C Whelan and D McBarnet ‘The Crisis in Professional Liability Insurance’, The Geneva Papers 14 (1989) 296 at pp 301–302.

76. For an example of negotiating to achieve the objects of regulation, see K Hawkins Environment and Enforcement (OW, Oxford, 1984) p 135.

77. See R Lempert ‘Discretion in a Behavioural Perspective’ in K Hawkins (ed) op cit n 69, pp 204–206.

78. This is the meeting that has to be held under IA 1986, s 98. The information which has to be provided for this meeting is set out in IA 1986, s 99. For an account of the meeting and the role of insolvency practitioners and directors in it see Wheeler op cit n 64.

79. ‘Hidden Assets’ refers to property that may have been disposed of as a result of preferences (see IA 1986, ss 239 and 241) and transactions at undervalue (see IA 1986, ss 238 and 241).

80. The more usual model is for an issue of professional culture and practice such as this to be individual specific. Individuals who moved between firms would then have their cultural values endorsed by other members of the firm they joined; see G Bloor and P Dawson Understanding Professional Culture in Organizational Context’, (1994) 15 Organization Studies 275 at pp 287–291.

81. The type of organisational structure employed for disqualification is similar to that described by Van Maanen and Pentland in relation to the methods used by auditors to record information. Their observation that ‘[as] symbols…reports are rhetorical forms designed to convince an audience of the legitimacy of some organizational action’ is particularly pertinent for insolvency practitioners given their concerns about monitoring, see J Van Maanen and B Pentland ‘Cops and Auditors: The Rhetoric of Records’ in S Sitkin and R Bies (eds), The Legalistic Organization (Sage CA, 1994) p 53.

82. See M Feldman and J March ‘Information in Organizations as Sign and Symbol’ (1981) 26 Admin Science Quart 171 esp 177 ff.

83. That there is a potential conflict between the periodic snapshot approach and a longer term overview is identified by Jacobs J in Re Packaging Direct Ltd (1994) BCC 213 at 219 F-H where in rejecting an application for disqualification the judge makes the point that charges consisting of inter alia the failure to prepare and file accounts and the failure to pay over Crown monies when due have to be considered against the continuous attempts of the directors to sell the business and their actions in keeping creditors, including the Crown, informed of the situation.

84. Hawkins makes a similar observation on behalf of water pollution officials dealing with breaches of pollution control legislation, see K Hawkins (1984) op cit n 76 at p 183.

85. Freedman and Power point to the substance versus fm debate as being grounded not only in issues of professional territory and control but also as fed by differences in historical, cultural and educational development, J Freedman and M Power Law and Accounting: Transition and Transformation’ (1991) 54 MLR 769 at p 770 and pp 784–785.

86. CA 1985, s 221.

87. CA 1985, s 363.

88. CA 1985, ss 288, 352–353.

89. See D Henry ‘Disqualification of Directors: A View from the Inside’ in Rajak (ed) op cit n 22 179 at p 180, ‘[t]he type of matters that might lead to a decision to take no further action are….(iv) the failure may be one where there is no great element of positive unfit conduct, the unfit conduct being merely technical,…(v) the conduct is no more than one item or is simply a series of minor examples of unfit conduct.’.

90. The lack of a unitary perspective on this point within the judiciary has been the subject of comment by Finch who points out that the courts have shown an inability to pursue a consistent policy vacillating between protective and punitive principles, see V Finch (1993) op cit n 3.

91. The National Audit Office report identified the objectives of the Insolvency Agency with respect to disqualification as being the protection of the public and the commercial world and improving the standards of company stewardship (op cit n 6, para 4.1). The Disqualification Unit, as an integral part of the Insolvency Agency, is presumably included within this. However the uniformity of this view is called into question by the comments of David Henry (a senior member of the Unit), ‘yet (my emphasis) it is clear that the courts do take account, in an intangible way, of whether the respondent is likely to be a danger to the (commercial) public in the future’ (D Henry op cit n 22 at p 183). This comment implies that while the courts are interested in the protection of the public, Henry favours a retributivist stance based on past conduct.

92. CDDA 1986, s 7(3).

93. Dworkin's two models of weak discretion on the one hand and strong discretion on the other are set out most clearly in Taking Rights Seriously (Duckworth, London, 1977) p 31–9, 68–71. Weak discretion apparently exists where either a decision will not be reversed by a higher authority or where a given standard has to be interpreted by the decision-maker. One view of the disqualification process is that the role of the insolvency practitioner is to discover facts and apply the criteria of schedule 1 to them and that as such this is not a discretionary exercise of power. This involves seeing the schedule 1 criteria as being devoid of any interpretative process. This is not a justifiable position with regard to criteria which ask for assessments of knowledge, intent and responsibility. Even if it was, Galligan mounts a convincing defence of discretion in relation to fact-finding by pointing out that ‘facts can be ascertained only by imperfect means, relying on imperfect procedures…any decision requires assessment and judgment both in fixing the methods for eliciting the facts and in deciding how much evidence is sufficient…there is some justification for talking of discretion in settling the facts’, see D Gallighan Discretionary Powers (OUP Oxford, 1986) p 34–35.

94. See for example the communication from the Disqualification Unit to all insolvency practitioners in November 1990 p 6; ‘[i]t has always been our policy to encourage insolvency practitioners to report misconduct however minor. This does assist with case selection when there are subsequent failures’.

95. The appeal to the public good can be seen as a device to further justify the conferring of professional status upon insolvency practitioners; they have been given professional status as ‘the tasks they perform are of such importance to the public good that leaving them unregulated would be undesirable’, E Friedson op cit n 57 at p 84. It is unlikely that the insolvency practitioners described here are in any way claiming professional space as part of territory-seeking rather simply bemoaning a lost opportunity for status gathering; as Flood and Skordaki point out, the recent history of lawyers and accountants as opposed to law and accountancy is one of co-operation and co-existence, J Flood and E Skordaki Corporate Failure and the Work of Insolvency Practitioners: Professional Jurisdiction and Big, Corporare Insolvencies (1993) Certified Accountants Research Series.

96. The approach of Millett J in Re Charnley Davies Ltd (No 2) (1990) BCLC 760 is particularly illustrative of this approach: having initially reified the professional judgment of, in this instance, an administrator into the traditional legal formulation of the ‘standards of…an ordinary, skilled practitioner’ (at p 775j) he then adopts a more pragmatic approach based upon the circumstances of the case and the commercial context of administration (pp 776–782a).

97. Adler and Asquith point to the importance of discovering the operational ideological frames of those exercising discretion and provide a list of empirically grounded studies where this perspective has been accommodated, see M Adler and S Asquith ‘Discretion and Power’, in M Adler and S Asquith (eds) Discretion and Welfare (Heinemann, London, 1981) at p 24.

98. Reichman makes the point that different goals or objectives can result in investigations of ‘qualitatively different scope and depth’, N Reichman ‘The Widening Webs of Surveillance: Private Police Unravelling Deceptive Claims’, in C Shearing and P Stenning (1987) Private Policing (Sage, CA) 247 at p 259.

99. It seems that a wide variety of decision-makers imbued with discretion construct for themselves a moral frame to operate within; J Gilboy op cit n 69 at p 585 and J Skolnick Justice Without Trial, (1965, Wdey, New York) p 45.

100. An insolvency practitioner should not act as liquidator in relation to a firm with which he or any member of his firm has previously been associated within the previous three years. See for example IPA Ethical Guide 8 June 1987, para 6, a prohibition which is echoed by the ethical codes of the other RPBs. An infamous example of the application of this structure is the controversy which surrounded the appointment of the administrators of Polly Peck Plc, see (1993) Times 6 July and (1993) The Independent 3 July, p 19.

101. Examples of this were given as the ‘rag trade’ and ‘scrap-dealing’. The justification for this was ‘all cash you see’!.

102. Different levels of personal experiences result in a lack of uniformity in decision-making by insolvency practitioners. This is echoed by Emmerson who points to the effect of ‘setting’ on the differences in definitions of events and concepts among different administrative agencies: R Emmerson ‘Holistic Effects in Social Control Decision-Making’ (1983) 17 L&S Rev 425 at 430–436.

103. The existence of different organisational agendas between agencies which are essentially part of a linked two stage process in the same way as insolvency practitioners and the Disqualification Unit is noted by Emerson and Paley, op cit n 71 p 239–245.

104. See CDDA 1986, s 7(2) for the time limit imposed on applications for disqualification and para 3.15 of the report for the approach of the Disqualification Unit.

105. Para 3.16. The ‘operational reasons’ are not detailed.

106. See the caveat about the figures for voluntary insolvencies contained in note 14.