UK Corporate Civil Enforcement: A Broadened Enforcement Remit and New Enforcement Tools

Summary

The UK Insolvency Service published a consultation on 25 March 2026 (closing 17 June 2026) proposing the most comprehensive reform of corporate civil enforcement in four decades. The reforms would expand the Insolvency Service's remit beyond insolvency to cover all corporate misconduct in live, insolvent, or dissolved companies. Key proposals include: (1) structural reforms: mandatory disqualification on public interest winding up, a new director restrictions regime, shifting disqualification decision-making from the courts to the Insolvency Service, reversing the burden of proof for undervalue transactions with connected parties, and a new disqualification ground for HMRC securities breaches; (2) expanded information-gathering powers for investigations into both live and solvent companies; and (3) procedural modernisation, including allowing Part 7 CPR proceedings and extending limitation periods to five years. The two most significant proposals - the director restrictions regime and the transfer of disqualification decisions to the Insolvency Service, raise substantial questions about fairness, insurance implications and the practical impact on turnaround professionals.

UK corporate civil enforcement: a broadened enforcement remit and new enforcement tools

On 25 March 2026, the UK Insolvency Service released a consultation on corporate civil enforcement reforms. The consultation runs until 17 June 2026. It proposes to significantly modernise the civil enforcement toolbox, the first comprehensive review in four decades. The Insolvency Service's remit is set to expand significantly beyond its traditional insolvency-focused activities to encompass all corporate misconduct, whether in live, insolvent, or dissolved companies.

The consultation has three strands: (1) structural reform; (2) improvement to information-gathering powers; and (3) procedural changes.

Structural Reform: Five Proposals

1. Mandatory disqualification for public interest liquidations under s.124A(1)(a) Insolvency Act 1986

The proposal envisages the automatic disqualification of directors of companies wound up in the public interest under section 124A(1)(a) of the Insolvency Act 1986 for a period of five years. Currently, the disqualification process begins only after the court has made a winding-up order. Enabling the court to make a disqualification order at the same time as the winding-up order would reduce the time and cost involved.

2. Introduction of a director restrictions regime for negligent or incompetent directors

A new administrative process is proposed for directors who have acted negligently or incompetently, as distinct from those who have wilfully committed wrongdoing. The stated aims are to streamline the process, reduce costs and improve timeliness while providing a proportionate response to lower-level misconduct - avoiding the "all or nothing" nature of full disqualification under the Company Directors Disqualification Act 1986 (CDDA 1986).

Under the director restrictions regime, a restricted director would be permitted to continue operating a company but subject to specific conditions, such as:

• Requiring a joint bank signatory and at least one additional non-restricted director
• Ensuring sufficient paid-up capital
• Keeping company filings up to date and complying with industry-specific regulations 

Breach of a restriction would constitute a standalone new disqualification ground. A restriction would be in place for three years. The Insolvency Service (rather than a court) would decide whether a director's conduct warrants a restriction, subject to a right of appeal.

The consultation also asks whether a director of an insolvent company could be offered the option to complete a mandatory training course as a one-time alternative to a restriction, akin to a speed awareness course for drivers.

3. Shift of disqualification and restriction decision-making from courts to the Insolvency Service

The proposal seeks to transfer the decision as to whether a disqualification order is made (or a director restriction is imposed) from the courts to the Insolvency Service. A separate department within the Insolvency Service would make the decision, distinct from the team leading the investigation into the director's conduct. Decision-making for compensation orders would also transfer to the Insolvency Service. An appeal to a court or tribunal would remain available.

4. Ensuring fair distribution of company assets upon insolvency: reforms to undervalue, preference, and misfeasance provisions

Transactions at an undervalue with connected parties (s.238 Insolvency Act 1986): The burden of proof would be reversed, requiring the recipient to demonstrate the transaction was for value.

Preferences to connected parties (s.239 Insolvency Act 1986): A presumption of insolvency at the time of the preference would be introduced. This presumption already exists for transactions at an undervalue with connected parties but does not currently apply to preferences, where the existing presumptions relate to the company's desire to prefer rather than insolvency.

Extortionate credit transactions (s.244 Insolvency Act 1986): The current "grossly exorbitant" test would be replaced with a less stringent test, such as "commercially disproportionate" or similar wording.

Misfeasance (s.212 Insolvency Act 1986): Section 212 would be amended to explicitly include shadow directors.

5. Director disqualification for breach of HMRC securities legislation

A new power would enable courts to disqualify directors for up to five years after a single summary conviction for failing to comply with HMRC requirements to give security (effectively a deposit) in respect of a tax liability.

Improvement to Information-Gathering Powers: Three Reforms

Procedural Changes: Three Proposals

1. Modernisation of the 1987 Disqualification Proceedings Rules (England and Wales)

The Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 would be modernised. Proposed changes include replacing affidavits with witness statements and enabling electronic service of claim forms, aligning these rules with the current Civil Procedure Rules.

2. Flexibility in court procedures: Part 7 CPR as an alternative to Part 8 CPR

Disqualification proceedings could move from exclusively following Part 8 of the Civil Procedure Rules (which requires all evidence to be filed upfront) to allowing the use of Part 7 CPR where appropriate, particularly for complex or contested matters. This would enable a more phased presentation of evidence, potentially reducing litigation costs and delays for all parties.

3. Extension of limitation period for complex director disqualification cases

For complex director disqualification proceedings against directors of insolvent or dissolved companies, the Secretary of State could extend the time limit from the current three years to up to five years without court approval. This recognises the increasing intricacy of corporate investigations.

Comment

Information-gathering and procedural reforms are uncontroversial

The proposed extension to information-gathering powers and procedural updates are welcome and do not appear controversial.

Insolvency asset recovery reforms are broadly sensible

Several of the structural reform changes are also welcome or uncontroversial:

• Presumption of insolvency for connected-party preferences (s.239 IA 1986): Aligning the presumption for connected-party preferences with the existing presumption for connected-party transactions at an undervalue removes an odd mismatch between the two regimes and is a logical reform.
• Reversal of burden of proof for connected-party undervalue transactions (s.238 IA 1986): This will make it easier for officeholders to bring claims, but where the transaction was genuinely for value, this can be evidenced. The practical impact will be in ensuring value is right and that decisions are well documented.
• Explicit application of s.212 IA 1986 to shadow directors and concurrent disqualification at public interest winding-up are both sensible clarifications.
• Reformulation of extortionate credit transactions (s.244 IA 1986): Responses will likely focus on ensuring any new test does not adversely affect rescue financing, a concern previously explored by the government in 2018.

The director restrictions regime raises significant unanswered questions

The director restrictions regime is the first of the two most far-reaching proposals. The current disqualification regime is already multi-faceted: courts can make disqualification orders, directors can give disqualification undertakings (introduced in 2001) and courts can make compensation orders (introduced in 2015). Adding a restrictions regime makes the legislative landscape more complex.

Key unanswered questions include:

• Customer and counterparty confidence: Will customers of a company with a restricted director continue to do business with it, knowing only that an additional non-restricted director has been appointed? Customers may seek to change payment terms, potentially accelerating the company's collapse.
• Directors' and officers' liability insurance: The consultation does not address the fact that a restriction is likely to have a significant impact on the ability to obtain D&O insurance. While there is no legal requirement to have D&O insurance in place, this is clearly an important factor for many directors – who may therefore cease their position.
• Civil liability exposure: Will a director restriction imposed for negligence lead to civil claims against directors by shareholders or other stakeholders, or automatically trigger compensation orders? Bringing such actions are inherently difficult but the fact of a restriction is likely to be helpful for those seeking to bring an action.
• Impact on turnaround professionals: The misconduct categories in scope for the restrictions regime include multiple corporate failures within a set period (e.g. three corporate insolvencies within five years) without additional evidence of corporate abuse such as abusive phoenixing. Turnaround directors who join a company late -  where insolvency is inevitable, but the aim is an orderly process - would be penalised for outcomes they did not cause, stifling corporate turnaround.
• Administrative burden on companies: The consultation states it is not designed to create new administrative burdens for companies, but the imposition of restrictions on a director would inevitably create compliance burdens and costs for the company itself.

Shifting disqualification decisions to the Insolvency Service raises fair process concerns

The shift of disqualification and director restriction decision-making from the courts to the Insolvency Service is the second most far-reaching proposal.

Under the current regime, the court must be satisfied on the evidence presented by the Insolvency Service that a director ought to be disqualified. A disqualification undertaking requires the director's consent. Under the proposed regime, the Insolvency Service would act as both prosecutor and judge in one, with the burden falling on the director to appeal.

This raises questions of fair process, even if the decision-making team is separate from the investigation team. The consultation itself references evidence that under the current court process, directors are often pushed into the undertaking route for fear of rising costs — explaining that 80% of all disqualifications arise from undertakings.

But it is a significant question whether it is appropriate for a director to have to positively prove their innocence, and whether the fact that appealing may be cheaper than defending a court case justifies the shift.

The proposal sits within a broader trend across the UK legal system of moving decision-making from courts to specialist tribunals - employment disputes, tax appeals, immigration matters and social security challenges are all now resolved through tribunals. In criminal law, the government plans to remove jury trials for many offences. The common thread is freeing court time for the most serious cases, reducing costs, deploying specialist expertise and delivering faster, more proportionate outcomes.

Timeline and legislative path

Given that at least some of the reforms would require primary legislation, there is a long path to implementation. At this stage, the government aims to use the consultation responses to shape potential measures to modernise the civil enforcement framework, and responses will inform the nature and scale of reform. As such the government is also to be commended for the open questions the consultation asks.