Expert advice on director disqualification proceedings
We provide guidance to company directors seeking to avoid adverse proceedings.
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If you are a registered, shadow, or de facto director accused of Misfeasance while managing a company, you could find yourself subject to Director Disqualification Proceedings in accordance with the Company Directors Disqualification Act 1986.
Director Disqualification Proceedings will commence and be based upon a claim that as the director of a company now in insolvency you:
- Committed a serious act of misconduct
- Are unfit to direct or manage the affairs of another company
I&L offers a range of solutions for directors subject to Disqualification Proceedings, including:
- Defending the proceedings
- Admitting the allegations (wholly or in part) with mitigating circumstances to reduce the length of any proposed ban
Without a court's permission, a Disqualified Director cannot be involved in any aspect of a company or limited liability partnership, including its:
You will be personally liable for the losses of any business you're involved in while disqualified. Additionally, you could face criminal prosecution.
Length of bans
Depending on the severity of the misconduct, you could be banned from being a company director for anything between 2 and 15 years. Obviously, this may detrimentally affect your long-term career. In recent years, the government agency responsible for investigating wrongdoing by directors, the Insolvency Service, has targeted serious and serial offenders with tougher sentences.
According to the agency's figures, the average monthly number of directors disqualified for 5 to 15 years rose steadily between 2010 and 2016 to 48. The increase is evidence of a clampdown by the Insolvency Service on directors who:
- Trade while insolvent
- Transfer assets into a new business to avoid paying creditors
- Make preferential payments to friends, family and other connected creditors
As a result, the terms of most disqualifications now range from 5 to 10 years. This includes offences such as:
- 'Losing' the company's accounts
- Failure to return deposits paid by online customers.
Directors who voluntarily admit misfeasance can avoid court proceedings a Disqualification Undertaking. The courts and Insolvency Service want to avoid unnecessary spending, and will consider reducing the length of a ban in exchange for a Disqualification Undertaking. Moreover, the costs for an investigation cannot be recovered from a director whose undertaking was accepted before court proceedings start. Subsequently, to avoid court costs, many directors facing disqualification offer an undertaking at the earliest opportunity.
Director disqualification proceedings are very serious and you will need expert assistance and support. I&L can prepare, guide, and advise directors how to protect themselves against adverse measures. Call 020 7504 1300 now for free and confidential advice…