ML Covered - May 2026

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.

UK Government consults on changes to corporate civil enforcement regime

On 25 March 2025, the UK Government launched a consultation on various proposals to reform the UK corporate civil enforcement regime, which is administered by the UK Insolvency Service. The consultation makes 11 proposals in respect of the corporate civil enforcement regime.

The consultation proposes that the Insolvency Service should have the power to disqualify directors without needing to apply to court. At present, the Insolvency Service can apply for a disqualification order if it is considered expedient in the public interest. However, it is currently the court who determines whether the test for disqualification has been met. Under the Government's proposals, the Insolvency Service would assume both the investigative and decision-making roles, although these would not be completed by the same individuals. The proposals would give directors a statutory right to appeal to the First-tier Tribunal within 42 days. The Government's rationale for this change is primarily to improve on time and costs.

The Government has also proposed introducing three-year restrictions on directors as a less severe alternative to disqualification for lower-level misconduct. Examples of lower-level misconduct include failure to adhere to company filing requirements on two or more occasions, failure to file returns with HMRC, and inadequate accounting records in circumstances where there is no evidence of corporate abuse. This proposed restriction regime is meant to be a proportionate middle-ground to many kinds of conduct that have historically been difficult for the Insolvency Service to deal with effectively.

Furthermore, the Government has proposed that, for cases deemed “complex”, the usual three-year timeframe, for when the Insolvency Service must bring disqualification proceedings against directors of insolvent or dissolved companies, should be increased to five years. This change is being proposed to allow sufficient time to investigate large-scale, nationally significant cases involving complex corporate structures and fact patterns.

Key Takeaways

While the proposal for the Insolvency Service to replace the Court as the decision-maker for director disqualifications may result in time and cost savings, the consultation acknowledges that the majority of disqualification proceedings are already settled by way of undertakings, rather than by court proceedings, which raises questions on the expected gains from this proposal.

Furthermore, the introduction of the Director Restrictions Regime would be an expansion of the Insolvency Service's enforcement remit, with the risk of many more directors being brought into the corporate civil enforcement regime. At present, a director can be disqualified following three or more convictions for failing to file accounts. However, the proposals would result in restrictions after just two failings.

For insurers this proposed change could result in D&Os seeking cover for the costs of responding to an investigation by the Insolvency Service. We will be keeping a close eye on developments and anticipate that the high number of corporate insolvencies is likely to result in further referrals of directors' conduct to the Insolvency Service.

To read more about the consultation, please click here.

Rising risks emerging from AI related D&O liability

Business Insurance has recently published an article addressing the rising risk to directors and officers from AI related D&O liability. Corporate leaders remain anxious to demonstrate their readiness in respect of the adoption of AI, but how they communicate their preparedness has the potential to expose them to potential D&O liability.

The number of shareholder class action claims in the US, relating to AI, doubled between 2015 and 2021. Directors could be exposed for overhyping AI opportunities, as well as for downplaying the risks. Furthermore, if companies adopt AI too quickly, they risk having weak controls in place. However, so far, little is known about how judges will view such AI-related claims on their merits.

As a result, during policy renewals, D&O insurers are now closely reviewing how corporate leaders are managing AI risk. However, underwriters' enquiries regarding AI are mostly limited to general-use questions.

As insurers are now coming to terms with AI risk, some insurers have started issuing exclusions for AI in their policy wording, or providing affirmative coverage. Several insurers in 2025 sought to include “absolute” AI exclusions in various liability policies.

Furthermore, if companies want their regulatory filings and disclosures to be covered under D&O insurance, greater care must be placed on who is making the disclosure. If directors are relying on AI itself to make disclosures, there is a risk of the AI producing “hallucinations” or the disclosure being subject to AI-related policy exclusions.

Key takeaways

Overall, D&Os should not wholly rely on AI and need to exercise independent judgment. Despite AI and its applications being new, D&Os should remain mindful that their obligations in respect of their directors' duties, corporate governance and oversight still stand.

To read more, please click here.

Corporate insolvencies rise in March 2026

On 17 April 2026, the Insolvency Service published its Company Insolvency Statistics for March 2026. In March 2026, the number of company insolvencies was 2,022. This was 7% higher than the number of company insolvencies in February 2026, being 1,895. However, this is a similar level to March 2025, which saw 1,995 company insolvencies.

The number of administrations in March 2026 were 52% higher than in February 2026 and 82% higher than in March 2025. This sudden increase has mostly been driven by more than 100 connected companies in the Real Estate sector entering administration. Despite this, the number of creditors’ voluntary liquidations in March 2026 was slightly lower than February 2026, and lower than the 2025 monthly average. Compulsory liquidations were also lower than the 2025 monthly average.

Key Takeaways

Despite the Insolvency Service placing the sudden increase on the real estate connected companies entering administration, the fact remains that the number of corporate insolvencies reached a 30 year high in 2023, and has remained high across 2024, 2025 and the beginning of 2026.

UK inflation rose to 3.3% in March 2026, a rise largely driven by rising fuel prices as a result of the Iran War. This will likely put further financial pressure on companies. Furthermore, companies will be incurring further expenses in the 2026/27 financial year, such as the business rates and the hike to the national minimum wage. These financial pressures all indicate that the number of corporate insolvencies will likely remain high for the foreseeable future.

To read the March 2026 corporate insolvencies statistics, please click here.

Government launches TUPE call for evidence: what employers need to know

The Government has launched a formal call for evidence on the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE) as part of its wider “Make Work Pay” reform agenda. This is the first substantive step towards changes in one of the most complex and high-risk areas of employment law.

No specific reforms have yet been proposed. However, the consultation raises important questions for employers involved in outsourcing, insourcing, service provision changes, and mergers and acquisitions.

Background

TUPE is intended to protect employees when a business or service transfers from one employer to another. In broad terms, it:

• provides for employees assigned to the undertaking or service to transfer automatically to the new employer.
• preserves their existing terms and conditions; and
• restricts dismissals where the principal reason is the transfer itself.

The call for evidence seeks to test whether TUPE remains fit for purpose in a modern market and whether reform is needed. The consultation is open until 1 July 2026.

What is the Government looking at?

The call for evidence is broad and seeks practical, experience‑based input from employers on whether TUPE is clear to understand, and whether the obligations on employers for consulting employees remains workable and cost effective. 

Possible direction of reform

While the Government is not yet consulting on specific draft changes it is anticipated that it is unlikely that TUPE will be diluted, and that stronger worker protections will be promoted.  There may be clearer statutory definitions, with more prescriptive rules. 

Next steps

Employers will have until 1 July 2026 to submit their feedback.  To read more, please click here.

Employment Tribunal pressures in 2026: what employers need to know from the latest user group minutes

The minutes from the National User Group have now been published. The minutes provide a useful insight into the current state of the tribunal system, confirming that claim volumes are increasing, cases are becoming more complex, and delays in listings are likely to continue for the foreseeable future.

Key Trends

• Employment Tribunal claims are now at their highest level. The number of single claims is expected to exceed 60,000, compared with an average of around 33,000 in 2019–2020, and overall claim volumes across the Tribunal system continue to rise.
• The complexity of claims is also increasing, with around 60% of cases nationally now involving more complex issues, such as discrimination and whistleblowing.
• Tribunals are also seeing an increasing use of AI in claim documents, which is contributing to longer, over-pleaded and poorly focused claims, more complex pleadings, a rise in reconsideration and interim relief applications, and inflated schedules of loss with exaggerated remedy calculations.
• The Tribunals under the most pressure are London South, Midlands East and South East regions, with the wait times for these Tribunals being the highest. In these regions, hearings longer than 5 days are being listed into the second half of 2028 and the first half of 2029. Wales has the shortest waiting times, with cases being listed for the first half of 2026.

What this means for employers

Employment Tribunal litigation is now likely to take longer, be more expensive and demand greater management time. As claims become more complex, they require increased case management, greater volumes of disclosure and larger numbers of witnesses, resulting in longer final hearings and higher overall legal spend.

These longer hearings in turn slow the rate at which Tribunals can dispose of claims, leading to increased waiting times for listings. In light of these growing delays, it is critical that employers keep clear and comprehensive records, conduct prompt and thorough investigations when issues arise, and maintain well organised document retention systems, given that hearings may not take place until several months or even years after the events in question.

It is increasingly evident that more employees are willing to pursue litigation as awareness of their employment rights grows. Employers should therefore anticipate a continued rise in the number of Employment Tribunal claims and ensure that their policies, procedures and training are robust and up to date.

The Tribunal Judiciary notes that the strongest areas of claimant activity are likely to remain discrimination claims, whistleblowing, pregnancy and maternity, disability-related adjustments, flexible working disputes, and victimisation claims.

Key takeaways

As matters are becoming increasingly complex and time-consuming, it is essential to be proactive dealing with claims by collating and retaining key evidence early and place a greater emphasis on frontloading the litigation by engaging in early discussions with key individuals who will be witnesses in the claim.  Otherwise, employers run the risk of losing vital evidence which could later prejudice their position.     

Pension Schemes Bill: Government waters down mandation powers

The Government’s controversial ‘mandation’ powers in the Pension Schemes Bill have been significantly watered down following strong opposition from the pensions industry and the House of Lords in particular.

The original clause would have allowed ministers to direct how defined contribution (DC) pension schemes invest, effectively enabling the Government to require funds to allocate assets to UK infrastructure and other domestic projects. Industry bodies, peers and MPs warned this risked turning pension assets into a vehicle for political “pet projects” and undermining trustees’ duties to act in savers’ best interests.

The Government announced the amendments, which materially narrow the scope of the reserve power, following two Bill rejections by the House of Lords. The proposed changes are that: the power can only be exercised once; will automatically lapse in 2035; and is now capped so that any mandated investment can apply to no more than 10% of assets in default funds, and no more than 5% in UK-based assets. These limits align with the voluntary Mansion House Accord, under which major DC providers have already committed to increasing allocations to unlisted investments.

To consider the proposed amendments in detail, click here.

TPR urges pension plans to sharpen dashboard data

The Pensions Regulator (TPR) has warned schemes that preparations for pensions dashboards are falling behind on "value data" – i.e. the value of a pension pot and its projected worth at retirement.

While TPR reports good progress on personal data – matching members to their pension records – work on value data is “less advanced”, with the deadline for uploading data to the system just 6 months away, in October 2026. TPR has urged schemes to step up testing of the methodologies and assumptions used to generate current pot values and projected retirement outcomes, to ensure information is accurate, consistent and “dashboard ready”. Defined benefit (DB) schemes are a particular focus. TPR highlights DB arrangements as the most likely to hold outdated or incomplete value data and will begin targeted supervisory work in May to assess progress.

The message from TPR is clear: firms that are not connected to dashboards by 31 October 2026 should expect regulatory intervention. Where TPR identifies wilful or reckless non-compliance, it has signalled a robust enforcement response. Trustees should urgently review their value data strategy, governance and testing frameworks to avoid the risk of TPR intervention as the deadline approaches.

Scheme Administrator restriction comes into force  

The long-awaited change to the law requiring a registered pension scheme’s scheme administrator to be resident in the UK came into force on 6 April 2026. Previously, a pension scheme administrator could be a resident in the UK, a member state of the EU or non-member EEA state. The change was announced as part of the Autumn 2024 budget in an effort to move away from the pre-Brexit requirements to accommodate the EU freedom of movement principles.

HMRC has published updated guidance on how to register as such an administrator, see here.

If you have any queries or questions on this topic please do get in contact with a member of the team, or your usual RPC contact.