REFORMING THE PUBLIC REGISTER

3.50 The author took the opportunity to investigate the effectiveness of the DDR on two fronts. Firstly, the content of the DDR and, most importantly, its accuracy. 3.51 Content of the DDR It has already been commented upon that the DDR does not contain details as to the underlying factual circumstances leading to a person’s disqualification; unlike the IES. This in itself is considered, by the present author, a significant omission that undermines the policy of having an online directory in the first

place. A prudent creditor may wish to make searches of the DDR so as to ensure that he or she is not dealing with an unfit person; or a company may wish to make probing enquiries as to the good-standing of a potential appointee to the board.403 It is accepted

that, for the most part, additional details are superfluous; the mere fact that a director is listed should be sufficient to appease the enquiries of all but the most fastidious investigator. However, placing this information on the record, it is argued, would make great strides in the name of the public interest.404 Having the nature of one’s misconduct

placed out in the open can be a very powerful deterrent; far more so than just a name on a long list of offenders. It goes without saying that an increased deterrent effect is fundamental to the overall regime, and would go some way to increasing the trust and confidence in it. It is therefore submitted that all records on the DDR should contain a misconduct report for public viewing. This would be a well-received extension to the idea of ‘naming and shaming’, and is something that the IS have got right. CH could learn a lot from this approach.405

3.52 As an aside, it is somewhat curious that two separate databases exist in the first place, with different specifications and scope. Perhaps one solution would be to maintain one register that is jointly contributed to by both executive agencies, though it is assumed this would require a change in legislation to facilitate.

403 _{In a different context, CDDA 1986 checks are often carried out by various professions. For} example, the Inns of Court require all barristers before call to certify that they are not disqualified. If checks were carried out (either routinely or randomly), some may slip through the cracks if the register is not properly maintained.

404 _{Though as Hicks suggested, awareness amongst the public of the register may be in fact very low:} Hicks, Disqualification of Directors: No Hiding Place for the Unfit? (n 18) 53.

405 _{Perhaps somewhat selfishly, the author notes that it would also allow for considerably greater} scope for statistical analysis going forward.

3.53 Accuracy of the DDR As part of the author’s research, some investigations were made to understand the accuracy of the public register of disqualified directors. The reader will recall that CH is required by statute to maintain the DDR. It is comprised of information passed to it by the courts in relation to disqualification orders, and the IS in relation to undertakings. Much has been written in relation to the accuracy and completeness of the DDR in the past. Of particular importance are the two reports published by the NAO; the first in 1993406 and the later in 1999.407 In the 1993 report,

the NAO found that between December 1991 and November 1992 a substantial 58 per cent of records, out of a sample of over 100 disqualifications, had failed to be published on the register three months later.408 This report was followed up in 1999. Reflecting in

that report on the position in 1993, the NAO noted it was ‘disturbed’409 by the fact that

the DDR was ‘significantly incomplete’.410 It was argued by the NAO that the:

…register has an important part to play in maintaining the standards of company stewardship. The general public and the commercial world are entitled to rely on the accuracy and completeness of the register, the more so because they pay for access to it.411

It was suggested within the report that some blame was to be directed at the court system, for failing to notify CH that a disqualification order had been made within a timely fashion.412 Ultimately, however, the NAO concluded in its 1999 study that since

1993 matters had improved considerably. They reported that there was merely a ‘small level of inaccuracy’413 on the DDR at that time.

406 _{NAO Report (n 124).}

407 _{NAO Follow-Up Report (n 15).} 408 _{NAO Report, para 4.13.} 409 _{NAO Follow-Up Report, 57.} 410 _ibid.

411 _ibid.

412 _{ibid, para 2.42.} 413 _{ibid, para 2.43.}

3.54 The present author was able to conduct his own study on the accuracy and completeness of the DDR in respect of the survey records, in order to give a general appraisal of its state some 15 years following the latest published report addressing the issue. The author wrote a database query to cross-reference between the IES and DDR as obtained on 30th _{November 2013, to determine whether all of the records in the IES} were present in the DDR. In theory, all of the records should have appeared in both databases. However, it transpired that only 112 out of 285 records were recorded on the DDR. In other words, approximately 60.1 per cent of records in the survey were not recorded. In line with the NAO’s methodology, the author repeated the process three- months later. The same set of 285 IES records were compared with a new version of the DDR, obtained on 28th _{February 2014. Cross-referencing revealed that 170 records} had been placed on the DDR by that time. To put it another way, 40.4 per cent of records were missing from the public register three months later. It should be noted, as discussed previously in dealing with the methodology of the survey, it was because of these omissions that the author could not cross-verify much of the data between the IES and DDR to check for accuracy.

3.55 It is somewhat self-evident from the figures at hand that there is a large time delay, perhaps caused due to a backlog, between disqualifications being made and reflected upon the DDR. It should also be stated that the blame cannot lay at the feet of the court system in this instance (unlike with the NAO data), as the survey dealt with undertakings; not orders. Based on the survey information, a total of 58 records in the survey were added to the database within three months, which by way of extrapolation

suggests it may take up to a further six months before all records are successfully recorded on the DDR.414

3.56 This is troubling. To reiterate the NAO’s own arguments: there is a great public interest importance in ensuring the accuracy, and therefore the completeness, of the DDR.415 One primary purpose of the register is to enable the public to know who they

are dealing with. This promotes good stewardship of limited companies, as well as acting as a deterrent by ensuring that the wider general public can access the information freely. Any significant delay in the records appearing on the DDR therefore not only harms the underlying purpose of the register, in breach of a statutory obligation, but it also goes some way to defeating the effectiveness of the disqualification regime itself. In turn, this has implications for reducing the trust and confidence placed in it. The time delay may be of particular concern in respect of phoenix companies, where unscrupulous directors often will act as quickly as possible to raise a new company from the ashes, in order to continue trading. If information is not available on the DDR in a timely fashion it could cause issues for potential creditors, who are of course entitled to rely upon the accuracy of the information presented.416 Whilst there has clearly been

improvement since the NAO report in 1993, it is argued here, contrary to their later report, that standards are once again on the decline. This is a matter requiring urgent attention.

414 _{The author did not carry out any additional tests at routine intervals to see when all records were} in fact added; perhaps a missed opportunity.

415 _{Moreover, the Cork Committee considered an accurate, publicly, searchable register as being} crucial to a successful disqualification regime:Cork Report (n 68) paras 1824-1825.

416 _{Despite this, the survey at hand would suggest that phoenixism (with zero reports recorded in the} survey period) is becoming less of an issue than it previously was. However, this clearly does not excuse the potential for abuse created by the bad maintenance of the official record.