On 25 March 2026, the government published the Corporate Civil Enforcement Reforms Consultation, seeking views on a package of proposed measures to modernise the civil enforcement regime (as administered by the Insolvency Service). This supplements and reinforces their recent policy paper on “Fraud Strategy 2026 to 2029” (discussed here), demonstrating a continued focus on tackling bad actors in the UK corporate system.
The current enforcement framework, centred on director disqualification under the Company Directors Disqualification Act 1986 and the winding up of companies in the public interest, has not been comprehensively reviewed in nearly four decades. While incremental improvements have been made over the years, the government's view is that the existing tools no longer provide the flexibility needed to deal with modern, increasingly complex forms of corporate abuse.
In this article, we analyse three of the proposals that are of the greatest significance for civil fraud lawyers and insolvency practitioners, as well as business leaders and directors.
Director Disqualification: Mandatory Disqualification Following Public Interest Winding Up
One of the most significant proposals in the consultation is for company directors to be automatically disqualified for five years when a company is wound up on public interest grounds (i.e. where the conduct of the company is contrary to the interests of the public, either because of illegal activity or other inherently objectionable business practice). The rationale for this change is clear: a company is controlled by its directors, and if winding up that company is deemed to be in the public interest, it follows that its directors should bear responsibility.
Under the current rules, it can take up to two years to disqualify an “at-fault” director following a winding up order issued on public interest grounds, as a separate application and investigation must be conducted by the Insolvency Service under the Company Directors Disqualification Act 1986, in addition to the initial company winding up proceedings. The proposed changes would therefore facilitate a more robust and efficient civil enforcement regime (in line with the government’s wider fraud strategy), whilst a minimum disqualification period of five years would allow the Insolvency Service to investigate the severity of any misconduct and determine whether any disqualification should be extended. The director in question would retain a right of appeal in certain circumstances, for example in a scenario where the individual claims that they were not involved with the day-to-day operations of the company.
For fraud practitioners, this proposal is particularly significant. It would close a gap in the enforcement regime that has allowed individuals behind fraudulent companies, including those running consumer scams, investment frauds, and abusive phoenix operations, to continue acting as a director, potentially of other fraudulent companies, during the lengthy period between the winding up of one company and any eventual disqualification.
Director Restrictions: Incompetency or Negligence
At present, the Insolvency Service has two options when it identifies director misconduct: pursue full disqualification (which is a time-consuming and costly process), or take no action at all. The proposed changes would occupy a middle ground, allowing directors who have been negligent or incompetent (rather than wilfully dishonest) to continue acting as directors but subject to conditions designed to mitigate any risk they might pose.
The changes themselves include the following: (i) any company with a restricted director would have to ensure that there is at least one other director in office; (ii) that company would have to ensure the restricted director is not the sole signatory on the company's bank account; and (iii) the company’s filings and tax position must be kept up to date. The restrictions are proposed to last for three years, with the restricted director’s name being published on a publicly available list for the duration of the restrictions. Breach of a restriction would itself constitute a standalone ground for disqualification under the proposed regime.
In creating a less binary, and more proportionate response to less serious misconduct, and reducing the need for multi-year disqualification proceedings in every case, the above reforms are intended to free up valuable time and resources to allow the Insolvency Service to focus on investigating the most egregious cases of corporate abuse. The reforms would also strengthen the deterrent effect of the corporate enforcement regime on members of the wider business community, while increasing transparency to allow those doing business with restricted individuals to make informed decisions.
Reforms to Undervalue and Preference Provisions
Transactions at an undervalue
A transaction at an undervalue occurs when a company or individual transfers assets for significantly less than their market value, or gifts them, often shortly prior to insolvency. Currently, the burden of proof falls on the liquidator or administrator to demonstrate that the transaction was at an undervalue, which can be difficult to establish, particularly in complex multi-party transactions.
The proposed changes will effectively reverse the current evidential burden for “connected party transactions” (that is, where a transaction takes place between the company and a party that holds a pre-existing close relationship with that party, such as a director). Under the proposed law, where a liquidator or administrator believes a connected party transaction was at an undervalue in the two years before the insolvency, it would be for the connected party to prove the transaction was not carried out at an undervalue.
In practice, connected party transactions are among the most common methods for stripping assets from companies in the run-up to insolvency, and the current burden on liquidators and administrators to prove undervalue can be a significant barrier to recovery, particularly where records have been poorly kept or deliberately destroyed. These changes seek to level the playing field for office holders in an insolvency scenario and improve efficiency when pursuing those acting in bad faith.
Preferences
A preference is where a company takes steps to put a particular party, such as a creditor, in a better position than they would otherwise have been in on an insolvent liquidation.
There is currently a notable inconsistency in the law: while transactions at an undervalue with connected parties benefit from a presumption that the company was insolvent at the time the transaction took place, there is no equivalent presumption for preferences to connected parties.
The proposals intend to align the position between undervalue transactions and preference transactions, introducing a presumption of insolvency for connected party preferences. The connected party would be able to rebut this presumption, ensuring that transactions made at a time when the company was genuinely solvent are unaffected. These proposals promote a sense of fairness and consistency for office holders in attempting to recover assets that have been improperly removed from an insolvent company.
Conclusion
The changes proposed in this consultation mark a timeous and pragmatic shift in focus towards civil enforcement at a time where fraud and corporate abuse is becoming easier to conceal thanks to rapid advances in technology and AI. Such reforms may assist office holders and legal practitioners in creating faster, more flexible, and more proportionate enforcement of these issues. However, only time will tell whether the desired effect of such reforms will materialise in practice.
The consultation closes on 17 June 2026. Responses may be submitted via the online survey portal or directly to the Insolvency Service. We will report further when the response to the consultation is published.
