Directors Disqualification Proceedings

If you are a director of a company that goes into one of the different types of Insolvency, the Insolvency Practitioner instructed to deal with the matter is obliged to report upon the conduct of the directors of the company to the department for Business, Innovation and Skills.

Based upon this report, as a director of the company, you may face an action against you personally by the Government to disqualify you as a director for between 2 and 15 years. Such an action can be brought if you are accused of any one of a number of possible actions of misconduct including: continuing to trade when the company was insolvent, failing to keep proper records and failing to co-operate with the Insolvency Practitioner.

When assessing conduct, the court is entitled to judge a director unfit to be involved in the management of a company on the strength of conduct regarding:

  • The insolvent company alone or taken together with the director’s conduct as director of any other company or companies (including overseas companies)
  • Any matter connected with or arising out of the insolvency of any such company (including an overseas company).

https://www.gov.uk/government/publications/company-directors-disqualification-act-1986-and-failed-companies

The consequences of such an action can be personally and professionally devastating and most directors are unaware of the fact that even though they may not have taken an active role in the business for some time, this is unlikely to be a successful defence for them. It is therefore imperative that a director seeks professional advice as soon as difficulties arise in the company to minimise the possibility of such an action, which are often pursued rigorously by the authorities.

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