When a company enters into formal insolvency, the IS will send the directors a detailed questionnaire as part of its investigation to see if there has been unfit director conduct, and if so, potential director disqualification. Many directors underestimate this questionnaire, treating it as a somewhat irritating administrative exercise rather than the first and most important opportunity to shape the investigation.
Putting the questionnaire on the ‘to do’ pile is not the way forward.
In NDP’s experience, directors can very easily get into get into difficulty with the IS because of what they commit to writing. At this early stage, the questionnaire is key because it is where initial credibility and conduct is assessed, timelines are tested and director explanations are scrutinised. A single poorly phrased answer can turn what could have been a manageable IS enquiry into a full director disqualification investigation.
In this article we look at the ten most common mistakes we see directors make when completing an IS questionnaire, and how specialist legal advice can prevent avoidable damage and an expensive and stressful investigation procedure.
1. Why is treating the Insolvency Service questionnaire as a formality a serious mistake?
Many directors assume the questionnaire is simply a fact‑finding exercise. It is not. It is the Insolvency Service’s first assessment of your conduct, your credibility and crucially your understanding of your duties as a director. The tone and accuracy of your answers may influence whether the investigation proceeds further and escalates into director disqualification proceedings.
Treating the questionnaire as “paperwork” rather than as part of a legal process is a misjudgement we often come across.
2. Why is answering questions literally instead of strategically dangerous?
Directors often respond line by line without understanding the purpose behind each question. The IS is not just collecting information. It is testing, for example:
- Whether you understood your duties as a director
- Whether you monitored the company’s financial position
- Whether you acted responsibly when insolvency became likely
A literal answer may be factually correct but strategically harmful. You must answer truthfully, but you must also answer in a way that properly explains your position, with context and detailed evidence as to what caused the insolvency. After all, at this stage, the IS is a stranger to the details of what went on in the company. This is your opportunity to give them all the detail they want. That must, however, be done in a structured and careful way.
3. Too much detail can be harmful. How do over‑detailed explanations create new lines of inquiry?
Trying to be helpful can backfire. We come across some Directors who provide long explanations that unintentionally reveal:
- Gaps in oversight
- Poor decision‑making
- Assumptions rather than evidence
This can lead to additional questions, extended investigations from the IS and an increased risk of director disqualification. The aim is to say what is accurate and relevant and to properly support these statements with detailed and provable evidence where possible.
4. Why is casual language so dangerous in questionnaire responses?
Directors often use informal phrases in their answers, such as:
- “I assumed”
- “I thought”
- “I did not really check”
- “I left it to someone else”
These phrases might feel harmless to the director, but they are routinely seen by the IS as pointers towards evidence of unfit conduct – and ‘unfit conduct’ is at the core of any investigation. They may suggest a lack of proper oversight and a failure to discharge statutory duties.
Precise language matters. Careless wording makes it easier for the IS to characterise your conduct as unfit.
5. Why do directors contradict the evidence without realising?
Many directors complete the questionnaire without reviewing key material, including:
- Bank statements
- VAT returns
- Management accounts
- Emails and internal records
This leads to answers that conflict with the documentary evidence when it is scrutinised by the IS at a later date. Inconsistency is one of the fastest ways to escalate a case towards director disqualification. The IS will always cross‑check your answers against the company’s records.
Your answers must be consistent with the documents. Where there are gaps or uncertainties, those should be explained carefully by the director with supporting evidence.
6. Why does emotion undermine a director’s position?
It is common for directors to express frustration about:
- HMRC
- Creditors
- Business partners
- The Insolvency Practitioner
Emotional commentary in the questionnaire might feel justified, but such language can easily damage credibility. The IS is looking for calm, factual, evidence‑based explanations. Anything that appears defensive, angry or evasive may weaken your position and makes it easier to characterise your conduct in a negative way.
7. Why do directors focus on the wrong issues?
Directors often talk about how hard they worked, how much they invested personally, or how much they cared about their staff. Those things care often relevant, but they are not the primary concern of the IS.
Its focus is on:
- Loss to creditors
- Loss to the public purse
- Investor harm
- Trading decisions made after insolvency was likely
- Preferential or improper payments
If your answers do not engage with these issues directly, they risk being treated as incomplete or evasive, which can support an allegation of unfit conduct and increase the likelihood of director disqualification.
8. Why are timelines so important in questionnaire responses?
Director disqualification cases often turn on timing and the sequence of events. Directors frequently provide explanations without anchoring them to clear dates. This creates confusion about:
- When insolvency was recognised
- When professional advice was taken
- When creditors were paid or not paid
- When key decisions were made
A weak or confused timeline is often interpreted as poor governance and inadequate control, which leads again to concerns that the director’s duties were not being carried out. A clear, accurate timeline, supported by evidence, is one of the most effective tools in convincing the IS not to continue with a director disqualification investigation.
9. Why is submitting answers without legal advice so risky?
The questionnaire is not an administrative task. It is a legal document that will be used throughout the investigation by the IS. Once submitted, it cannot be withdrawn. NDP regularly sees cases where directors have:
- Admitted unfit conduct without realising it
- Misunderstood the question
- Provided unnecessary detail
- Contradicted themselves or the documents supplied
Early legal advice can prevent these errors and often stops a case progressing to a full director disqualification investigation, or Director Disqualification Court proceedings. It is almost always more cost‑effective to pay for and obtain legal advice before submitting answers than to try to repair the damage afterwards.
We saw this play out for two gym business directors whose disqualification investigation was dropped after we helped them get their questionnaire answers right before submission.
10. Why is the questionnaire a critical opportunity to shape the narrative?
The questionnaire is the first and best opportunity to present:
- A clear timeline of events
- A credible explanation of the company’s difficulties
- Evidence of responsible behaviour
- Mitigating factors
- Details of professional advice taken at the time
Handled correctly, it can reduce the risk of disqualification or shorten the length of any Director Disqualification ban. Handled poorly, it can create problems that did not previously exist and give the IS a stronger basis for a director disqualification claim.
Two testimonials where NDP advised clients on the Insolvency Service Questionnaire resulting in the Director Disqualification being abandoned
The two lines of enquiry by the IS focused on alleged overstatement of company turnover when applying for a Bounce Back Loan (BBL), and alleged misuse of the BBL funds once received.
The questionnaire sought information that could clarify the circumstances in which the BBL was obtained by the company.
The NDP team led by Sukhbir Mall assisted the client in preparing his answers to the Questionnaire, in a targeted and case specific manner, setting out when doing so all the relevant circumstances of the case.
We also made targeted enquiries of the IS, to determine the evidence they had already compiled during the course of their investigation. Having received the client’s detailed written representations, supported by 3rd party evidence, the IS concluded that the client was not unfit to be a director of a limited company and that taxpayer’s money would not be best spent investigating the matter further.
In this case, the director had allegedly overstated company turnover by factor of 10 when applying for a BBL.
We highlighted to the Director the importance of answering the questionnaire received from the IS very carefully, as his answers were being considered with a view of bringing director disqualification proceedings against him.
With guidance from Mandeep, the Director was able to prepare a spreadsheet, to evidence how he had calculated the turnover figure. Mandeep also tasked the Director to obtain bank statements to back up the figure and was therefore able to explain in the completed questionnaire the basis on which the Director had put the turnover figure on the BBL application form.
Mandeep in the completed questionnaire sent to the IS was able to explain the above to them, and once they reviewed it, they subsequently abandoned their investigations against the Director.
What should directors do if they have received an IS questionnaire?
In our experience, Directors who seek timely specialist advice before submitting their questionnaire achieve significantly better outcomes in potential director disqualification cases. The questionnaire is not a formality. It is the foundation of the investigation.
If you have received a questionnaire from the IS, or expect one, you should:
- Avoid rushing to respond
- Gather the key documents first
- Resist the temptation to “explain everything” in one go
- Obtain specialist legal advice before anything is sent back
NDP advises directors nationwide on all aspects of director disqualification investigations, including drafting and reviewing questionnaire responses, dealing with follow‑up enquiries, and defending disqualification proceedings where they arise.
The questionnaire is only the first stage. For a full picture of what follows, from Section 16 Letter through to Court proceedings, see our guide to Director Disqualification.
Take a look at a recent case involving abusive phoenixism and unpaid tax – another example of how quickly matters can escalate when directors fail to meet their obligations to HMRC.
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Frequently asked questions
What is the IS questionnaire?
It is a formal document sent to directors of insolvent companies. It is used to assess whether the director’s conduct should be investigated further for potential director disqualification. The answers form a central part of the evidence in any later proceedings.
Do I have to complete the questionnaire?
Yes. Failure to respond, or responding inadequately, can be treated as non‑cooperation. That may itself be relied upon as evidence of unfit conduct and can increase the risk of director disqualification.
Can my answers be used against me?
Yes. The IS relies heavily on questionnaire responses when deciding whether to pursue director disqualification proceedings. Your answers will be compared against the company’s records, the insolvency Practitioner’s report, and any other evidence obtained.
Should I get legal advice before responding?
Absolutely. Early advice is often the difference between a routine enquiry and a full disqualification investigation. NDP regularly helps directors prepare accurate, consistent and defensible responses that address the IS’s concerns properly.
Can poor answers increase the length of a disqualification?
Yes. Inconsistent, emotional, or poorly structured answers can lead to allegations of unfit conduct that might otherwise have been avoided. This can increase both the likelihood of director disqualification and the length of any disqualification undertaking.
What if I have already submitted my questionnaire?
You should seek advice immediately. The team of insolvency solicitors at NDP can still help manage the investigation, correct misunderstandings where possible, and mitigate the impact of any errors. The earlier the intervention, the greater the scope to influence the outcome.
