At present, the law does not distinguish between those whose businesses fail through no fault of their own and those who are directly at fault as a result of misleading or deceitful conduct. Nearly all bankrupts lose their personal assets. They are disqualified from being directors of limited companies and they are subjected to numerous restrictions for up to three years. Too many people are unwilling to set up their own business because they are worried about the consequences of failure. We must change attitudes.
Most businesses fail because of bad luck or a lack of cash.
But for too long such people have been tarred with the same brush as the reckless minority whose company collapses because of fraudulent activity. Our proposals represent a radical reappraisal of the impact of financial failure on individuals. I hope that it will stimulate real debate about these issues, which are central to the development of a culture of responsible risk-taking. Consequently, in order to rehabilitate honest bankrupts, the intention is that the majority will be discharged within 6 months. This will not affect the ability of the trustee to claim any assets and the trustee will be able to apply to the court to prevent an automatic discharge if the bankrupt does not co-operate.