When a company becomes insolvent, there’s no shortage of perceptions about why. One we’ve heard more than once is that it is down to a dodgy director who has taken all the money. It is a common opinion that creditors are treated badly, that directors walk away unscathed while everyone else is left out of pocket. Whilst that can and does happen, that’s not what actually happens in most cases. In this blog, we take a closer look at what the process and the numbers actually show.

What actually happens when a company fails

Every formal insolvency process involves a licensed insolvency practitioner investigating the director’s conduct. It’s a legal requirement built into the process from the outset, not an optional extra or something that only takes place if a creditor raises a complaint. Before a company can be dissolved, the conduct of the directors has to be reported on.

What the numbers say

In the year to March 2026, 1,153 directors were disqualified across the UK. Company insolvencies over a comparable period numbered somewhere around 23,000 to 24,000. Put those together and roughly 1 in 20 insolvencies results in a director disqualification (a useful indication rather than an exact figure, since the two datasets don’t cover identical periods). It’s a clear sign that formal action against a director is the exception rather than the rule. It’s fair to say some director behaviour during the pandemic hasn’t helped that perception. A significant share of recent disqualifications relates specifically to the misuse of Covid Bounce Back Loans, a distinct, time-limited category of misconduct rather than a reflection of how most business failures happen.

The regulator draws the same line

The Insolvency Service’s own reform proposals make this distinction explicit. Where a company is wound up on public interest grounds, in other words, genuine, serious wrongdoing, disqualification would become automatic. But for directors who’ve simply neglected their corporate responsibilities or made poor decisions rather than acted dishonestly, a new “director restrictions” regime is being proposed instead, allowing them to continue to act as a director, just under closer supervision. Even the regulator recognises that struggling and wrongdoing are not the same thing.

Why most directors don’t fit the stereotype

At TruSolv, we see this distinction play out constantly. Most directors we speak to are exhausted, not evasive. They’ve been absorbing pressure personally for months, sometimes going unpaid themselves to keep staff and suppliers covered, long before any formal process begins. The Insolvency Service’s own stakeholder research into personal debt reaches a similar conclusion: that most financial difficulty stems from circumstances outside someone’s control, not poor character.

Balance matters here, for everyone

If every business failure were treated as suspected wrongdoing, fewer people would ever take the risk of starting a company in the first place. That wouldn’t actually serve creditors either. A healthy economy depends on people being willing to try, and sometimes fail, without assuming the worst about them. The safeguards that exist are there precisely so genuine misconduct gets caught, without treating every closure as if it were.

A fair process protects everyone

If you’re a director concerned about how a difficult decision might be perceived, or an accountant fielding this kind of question from a client, the record shows that ordinary business failure isn’t treated as a moral failing. Seeking qualified advice as early as possible simply gives a director the best chance of steering the outcome, rather than having it decided for them.

If qualified advice is what you need, our team is here to help.