Why past insolvency involvement is worth looking at

The claim, precisely

The claim this tool rests on is a population-level one: companies and directors with recent or repeated involvement in insolvent failures are, as a group, more likely to be involved in future ones than comparable companies and directors without that history. It is the same premise used by every commercial credit bureau, by the Insolvency Service, and — in statute — by Parliament.

The evidence

UK government-commissioned research. The Graham Review into Pre-pack Administration (BIS, 2014) tracked 499 pre-pack sales: 29% of businesses sold to connected parties (usually the same directors buying the business back) failed again within three years, against 16% of sales to unconnected buyers — and 25.5% of all pre-pack successor companies failed within 36 months. This is evidence about connected-party successor companies specifically, and it is the cleanest UK measurement of the “same people, next vehicle” pattern.

Statute. Parliament codified the pattern in the Finance Act 2020 (Schedule 13): HMRC can make directors personally liable for a company’s tax debts where they have been involved in at least two insolvent companies within five years. The Insolvency Act 1986 (s.216) has restricted re-use of an insolvent company’s name since 1986 for the same reason.

Peer-reviewed population studies. On German population data, ventures run by previously-failed entrepreneurs survived to age seven 52% of the time versus 67% for first-time founders, and founders with a prior bankruptcy were measurably more likely to go bankrupt again (Gottschalk & Müller, Small Business Economics, 2022). On US venture data, founder track record predicts outcomes in both directions: previously successful founders succeed ~30% of the time, first-timers 18%, previously failed founders 20% (Gompers, Kovner, Lerner & Scharfstein, Journal of Financial Economics, 2010). UK academic work on millions of Companies House records finds founding directors’ backgrounds materially predict new-company survival (Wilson, Wright & Altanlar, 2014).

Industry practice. Creditsafe publishes that a director involved in a failed business in the last three years is “9 times more likely to fail again” (their figure, not ours — no methodology is published for it); Experian’s Commercial Delphi score uses directors’ credit behaviour as an input; Dun & Bradstreet’s Failure Score considers “the experience and performance of affiliated enterprises of the principal”. Director history is a standard, priced-in risk factor across the industry.

Our own measurement, on the UK public record. We tested the claim directly against the data behind this tool — ~105,000 director appointments to UK companies (2001–2023), classified strictly “as of” each appointment date so no information from the future leaks in. Companies joined by a director who had previously been on the board of a company when it entered formal insolvency went on to fail within 3 years 3.8% of the time, versus 1.0% for comparable directors with a clean record — roughly 3.2× the failure rate (95% CI 2.5–3.9) after adjusting for calendar period, company age, sector, and the length and intensity of the director’s career. The effect is dose-responsive (two or more prior failures → the next company fails within 5 years 10.7% of the time, about 5× the clean-record rate) and holds on newly incorporated companies (7.6% vs 2.0% five-year failure). The signal is predictive, not proven causal — it says where to look, not why. Full methodology, sample funnel, sensitivity checks and limitations are documented and reproducible.

What it costs providers

The FCA’s pure-protection market study (interim report, January 2026) reports that insurers wrote off around £100m of commission clawback debt between 2019 and July 2025, with a further £19m outstanding, following intermediary exits — more than 95% of it attributed to phone-based sales firms. The same report describes a “vicious cycle” in which a distressed intermediary sells new policies to cover clawbacks on old ones until it exits, leaving insurers to write off the debt. The FCA’s 2023 letter to life insurers asked firms to “improve their due diligence on new brokers” and observed that insurers “could often have acted sooner”.

The honest nuance

The research literature is genuinely mixed on honest entrepreneurial failure: some studies (notably Lafontaine & Shaw, 2016, on Texas retail) find serial entrepreneurs’ later businesses last longer, and EU policy deliberately promotes a “second chance” for honest failure. The evidence converges on elevated risk for a narrower set of signals: insolvent liquidations rather than mere closures, connected-party successor companies, short-interval or repeated failures, and dissolution used to escape creditors. Those are the signals this tool dates and displays — and why it distinguishes a director who was in post at a failure (or resigned within 12 months of it) from one who left years earlier or joined after.

Populations, not people

None of the above says anything about any individual. A base rate is a reason to look, never a verdict: plenty of directors with a past failure never fail again, and an insolvency record has many innocent explanations. That is why this tool states dated facts with their sources, shows timing (in post / resigned before / joined after), labels name-matches as “possible”, and computes no risk score about any person (a co-appearance strength orders investigation leads, never assesses anyone). Verify at the official source before acting on anything shown here.

Key sources: Graham Review into Pre-pack Administration (BIS, 2014) · Finance Act 2020 Sch 13 · Gottschalk & Müller, Small Business Economics (2022) · Gompers et al., JFE (2010) · Wilson, Wright & Altanlar, ISBJ (2014) · FCA MS24/1.4 interim report (2026) · FCA life-insurance Dear CEO letter (Sept 2023) · Creditsafe, Experian and D&B published methodology pages. Full citations with links: see the About the data page for source registers.