ML Covered - February 2025

We are pleased to share our latest instalment of ML Covered, our monthly round-up of key events relevant to those dealing with Management Liability Policies covering D&O, EPL and PTL-type risks.

Insolvency Service publishes its 2024/25 enforcement actions against directors

The Insolvency Service has published its enforcement outcomes for 2024-25, detailing the enforcement actions taken against directors. The information is not for the entire year but covers the period between April 2024 to December 2024.

Director Disqualifications and Bankruptcy Restrictions

During the period, there were 754 director disqualifications resulting from enforcement activity under sections 2, 6 and 8 of the Company Directors Disqualifications Act 1986 (the CDDA), with the mean length of disqualifications being 8.2 years. The number of disqualifications is lower than 2023/24 to the same date, where 904 directors were disqualified.

There were 703 director disqualifications under section 6 of the CDDA from April 2024 to December 2024. Section 6 relates to unfit conduct in relation to an insolvent or dissolved company. This is a decrease from last year's figure to the same date of 856. Similar to the previous year, the majority of these disqualifications related to allegations of Covid-19 financial support scheme abuse, with a mean disqualification of 9.3 years. Of the 703 disqualifications only 13 related to dissolved companies. The Insolvency Service has had the power to investigate directors of dissolved companies as well as insolvent companies since 2021.

The Insolvency Service imposed 101 bankruptcy and debt relief restrictions between April 2024 and December 2024, an increase on the 90 imposed over the same period in the previous year. As with the section 6 director disqualifications, the majority of the restrictions relate to allegations of abuse of the Covid-19 financial support scheme.

Key Takeaways

Although the number of disqualifications have decreased from the previous year to the same date, the number of enforcement actions taken by the Insolvency Service remains high. Many of these are a legacy of abuses of the Covid financial support scheme. With the number of corporate insolvencies reaching a 30 year high in 2023 (see our previous blog here) and a high number also expected for 2025, it can be expected that the Insolvency Service may be investigating the conduct of a larger number of directors, potentially resulting in an increase in the number of disqualifications, particularly under section 6 of the CDDA.

To read the Insolvency Service's enforcement outcomes, please click here.

The Institute of Directors set out their top risks to business in 2025

The Institute of Directors (IoD) has recently published a new policy paper exploring the economic, political, technological and geopolitical risks and opportunities facing UK businesses in 2025.

The second Trump presidency will define much of 2025. The IoD report that US investors and businesses appear excited about his low tax and deregulatory agenda. The IoD state that Trump's promise to impose tariffs appears at odds with his pledge to tackle inflation. Moreover, many countries may impose retaliatory tariffs of their own. The threat of tariffs larger than any since the 1930s poses a significant risk to the global economy.

In addition to tariffs, the IoD identified that debt is also expected to cast a shadow over the world economy. The International Monetary Fund predicts global growth to be 3% in 2025, driven mainly by the US and Brazil, Russia, India, China and South Africa ("BRICS"), with Europe's economy expected to stagnate. The growth of government debt remains a concern, particularly the US government deficit, which could reach 8% of GDP.

The IoD note that AI technology relentlessly advanced in 2024 but there are risks that the excitement around AI is running ahead of commercial reality, as the stock market has priced in future AI gains that may be over optimistic.  

Cybersecurity will continue to be a major problem for businesses in 2025. Despite technological advancements, human behaviour continues to be a significant weak point due to the human tendency to trust others, which leaves people vulnerable to phishing expeditions, ransomware attacks and data breaches. In 2025, it is predicted that more organisations will turn to insurance policies to mitigate the financial risks of cyber incidents, resulting in the tightening of underwriting requirements.

Finally, in the wake of problems at companies like the Post Office and Boeing, business culture is expected to be more in the spotlight, with companies under pressure to be more transparent and authentic, with an emphasis on building trust with both employees, consumers and stakeholders.

To read the IoD's paper, please click here.

Proposed Amendments to the Employment Rights Bill continued…

As discussed in last month's edition of ML Covered, several proposed amendments to the Employment Rights Bill (the Bill) were published in an Amendment Paper (the Paper) in November. More of the key changes proposed in the Paper are highlighted below: 

Trade Unions and Access to the Workplace

A notable change introduced in the Bill is the right for 'listed' trade unions to access the workplace for the purposes of 'meeting, representing, recruiting or organising workers' (whether they are members of a trade union or not) or to 'facilitate collective bargaining'. This does not, however, include access in order to organise industrial action. Unions will be able to apply to the Central Arbitration Committee (CAC) if employers do not agree to terms related to access. The CAC's determination must be consistent with the access principles outlined in the Bill, ensuring that access to workplaces is not unreasonable or disruptive to the employer’s business.

The proposed amendment would replace references to 'listed trade unions' with 'qualifying trade unions', a qualifying trade union being one which possesses a certificate of independence.

Non-Disclosure Agreements (NDAs) and Harassment

An amendment proposed by Liberal Democrat MP Layla Moran seeks to render void any provision in an agreement that prevents a worker from disclosing harassment. This change would apply to all forms of harassment under Section 26 of the Equality Act 2010, including sexual harassment.

Public Sector Outsourcing

The Bill reinstates the notion of the 'two-tier workforce code', which was originally introduced under the last Labour government and subsequently repealed in 2011 by the Coalition government. The aim of the 'two-tier workforce code' is to ensure that direct hires by contractors are not treated less favourably than their public sector counterparts and vice versa, therefore preventing the creation of a 'two-tier workforce.'

In addition to adjustments to the drafting of the provision, the proposed amendments would grant the devolved governments of Scotland and Wales the authority to create regulations and codes of practice under the clause.

Substitution Clauses in Employment Contracts

A proposed amendment, introduced by a Conservative MP, seeks to prohibit substitution clauses in agreements between employers and employees, workers, or dependent contractors. Substitution clauses are often used by employers who rely on gig economy workers, as they tend to signal a lack of employment relationship. The new provision would therefore close that loophole.

The Public Bill Committee will consider the proposed amendments in the coming weeks and was expected to report to the Commons at the end of last month. 

Blacklisting laws to cover strike action

The Court of Appeal in Morais and others v Ryanair DAC and anotherhas held that persons taking part in the 'activities of trade unions' for blacklisting purposes include those who are taking part in official industrial action.

Regulation 3 of the Blacklisting Regulations makes it unlawful to compile, use, sell, or supply a list of individuals who are, or have been, involved in trade union activities with the intention of discriminating against them.

Last year, the Supreme Court held in Secretary of State for Business and Trade v Mercerthat under section 146 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULR(C)A 1992), which protects workers from being subjected to a detriment relating to trade union membership or taking part in trade union activities, that 'activities of an independent trade union' did not include participating in industrial action. The failure to read section 146 compatibly with Article 11 of the European Convention on Human Rights prompted the court to make a declaration of incompatibility. However, the Employment Rights Bill seeks to address this incompatibility by inserting new sections into TULR(C)A 1992 so that a worker cannot be subjected to a detriment by their employer for taking part in industrial action.

Ryanair sought to rely on Mercer in arguing that the phrase 'activities of an independent trade union' under section 146 TULR(C)A 1992 should apply similarly in this case, therefore not encompassing industrial action. However, in Mercer, the phrase 'at an appropriate time' was seen as a strong indication that the 'activities of an independent trade union' in that section should not be interpreted to include industrial action. The same phrase is absent from the Blacklisting Regulations. Further, the consultation on the draft Blacklisting Regulations strongly indicated a contrary intention. The court noted that if Ryanair were right, the Blacklisting Regulations had failed to implement the government's intentions and to deal with the 'mischief at which they were aimed'.

The government plans to enhance protections against the use of blacklists in the Employment Rights Bill so that the prohibition will apply also to lists which are subsequently used for the purposes of discrimination, even where the list was not prepared for those purposes.

The Work Couch

For a useful overview of employment law changes in 2025, head to the latest episode of The Work Couch, RPC's podcast on all things employment, where we discuss the key reforms to employment law in 2025, and how employers can prepare. Listen here: What's on the horizon for employment law in 2025?

DWP confirms freeze on auto-enrolment thresholds

On 21 January 2025, the Department for Work and Pensions (DWP) published its 'Review of the Automatic Enrolment Earnings Trigger and Qualifying Earnings Band for 2025/26', which confirmed that the three auto-enrolment (AE) thresholds will be frozen at their 2024/25 level. This means that the AE threshold will remain at £10,000; the lower earnings limit will continue to sit at £6,240; and the upper earnings limit at £50,270.

The DWP have said that the focus of this review, and the decision to freeze the AE thresholds, was to ensure stability for both employers and individuals. The announcement comes in the wake of industry wide calls for a lowering of the thresholds, and commentators have not reacted with surprise.  The consensus is that this announcement has been influenced by the upcoming hike in employer national insurance contributions, and the wider economic uncertainty.

PTL insurers will want to note the development as AE attracts the highest number of regulatory interventions from the Pensions Regulator – the fact that the AE thresholds have frozen should hopefully mean that employers are unlikely to "get this wrong" provided that they are already adequately operating AE for their eligible workforce.

To read the DWP's review, please click here.

Trustees personally liable for over £5.2m in occupational pension scheme scam