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Bankruptcy and fraud

Comment 1st July 2010

The present bankruptcy and insolvency laws allow fraudsters to operate far too readily.  The Official Receiver is too busy with 'genuine' cases, where people and businesses are in financial trouble through adverse conditions – they simply do not have the time (or intelligence) to apply the law properly against fraudsters and the police are lukewarm unless they have resources to spare and absolutely clear evidence, which is almost never.

As a result, fraud is increasing and, as much of this is shrugged off by businesses because it is of a value that does not make the deployment of lawyers worthwhile, the fraudsters get away with it.   Identity theft, fly-by-night companies, 'pre-pack' administrations and many other crimes are permitted to thrive, because these laws are either to lax or applied casually.  Companies House is worse than useless; their information input is taken on trust and only the most extreme situations are investigated.

I suggest that – as new, small businesses are to be at the heart of Britain's Recovery – the Department for Business should make it a top priority to tighten the law and to stiffen those civil servants who are lax and lazy in tracking down and dealing with fraudsters.  Proper proof of identity of directors and their home addresses should be a start, previous failed companies associated with directors should be published for 15 years after resignation and the law should clearly make directors or sole traders liable for all potential frauds.

Why does this matter?

This tightening of fraud prevention through the bankruptcy and insolvency law is important to undo the slackening of constraint imposed by New Labour and the consequent rise in risk to new small businesses and consumers, who are immensely frustrated when debts cannot be collected because sharp practice or fraud has been permitted. 

To ensure the Recovery, Britain will need to rely on new businesses and entrepreneurs, These new businesses will operate in a more assured way if the risk of fraud and debt-avoidance is reduced.  The regime at Companies House and at the Official Receiver's office has become lax – they take the easy option to reduce workload and tick boxes and have no concept of 'working in the real world'. 

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