The Insolvency Service can bring proceedings to have a company director disqualified. This would prevent an individual from working as a company director for between two and 15 years.
Here’s a step-by-step guide explaining how the Director Disqualification process works.
If you are facing director disqualification proceedings and need expert legal advice, call us today on 01908 414990, email us at firstname.lastname@example.org or complete our free enquiry form and we will call you back.
Director Disqualification process
The Insolvency Service conducts an investigation
If a company is insolvent, it may either enter into administration or liquidation. Either way, the administrator or liquidator will review the conduct of the company director(s) over the past three years. If there is any evidence of misconduct, a report is submitted to the Insolvency Service. The Insolvency Service may then investigate the matter further.
Another UK authority may also investigate the actions of a director, even if the company is still operating and has not entered into any kind of insolvency proceedings. This might happen if formal complaints are raised, the director is accused of a criminal offence, or the director is made bankrupt.
A Section 16 letter is issued
If there is evidence of director misconduct, formal Director Disqualification proceedings are commenced. Director Disqualification proceedings can be raised up to three years after the company has been dissolved or entered into insolvency. There are no time limits for live companies.
The first step of the director disqualification process is a Section 16 letter. This is sent to the director. It states that the Secretary of State intends to issue a disqualification claim under the Company Director Disqualification Act.
The Section 16 letter will also detail the allegations being made against the director, the length of the disqualification being sought, and the director disqualification process. It is at this point that you should contact a Director Disqualification proceedings lawyer. You stand a much better chance of securing a positive outcome if you get expert legal advice.
The director responds
Once a Section 16 letter has been received, the director must decide how to respond. There are two options: either defend the allegations, or agree to wrongdoing and enter into a voluntary Director Disqualification undertaking.
If you have received a Section 16 letter, we strongly recommend that you get legal advice before making a decision. It you accept wrongdoing, then it may be preferable to enter into an undertaking. This saves you the hassle of court proceedings. It may also mean a reduced penalty. However, there are adverse consequences that you need to be aware of. You will be disqualified as a director for at least two years. You will also face other restrictions, and possibly a compensation order. We can negotiate the terms of the undertaking on your behalf.
If you dispute the allegations, or a director disqualification would have too big an impact on your life, then we can help you with a defence. You are only given a short amount of time to respond – usually 10 days. We can request a time extension to allow for a more detailed response to be compiled.
What happens next depends on which route you take.
Enter into a voluntary undertaking or submit a defensive challenge
Where a director enters into a voluntary undertaking, there may be a period of negotiation while the terms are decided. Our solicitors will always negotiate the lowest period of disqualification possible. Afterwards, both the director and the Secretary of State sign the undertaking, which comes into effect 21 days later.
Where a director wishes to defend the allegations, a director must respond to the Section 16 letter stating why a disqualification is unwarranted. This requires a very detailed response with sufficient evidence to support the defensive challenge. This may be enough to get the claim dismissed.
A court hearing is held
If the initial response is not enough to deter further action, then formal court proceedings are issued. A date is set for a court hearing. Evidence is heard from both sides. The director is entitled to legal representation.
If the court finds the director guilty of misconduct, it will issue a director disqualification order. This determines the length of the disqualification, plus any other conditions. For example, you may be subject to a compensation order.
Application for leave to act
Individuals who are subject to a director disqualification order or undertaking cannot be a director of a UK company, or a company that has links to the UK. They also cannot be involved in the formation, running or promotion of a company. There are some additional restrictions too. For example, they cannot be a charity trustee.
If you want to perform any of the duties which are restricted under a director disqualification order/undertaking, then you must get permission from the court. This involves making an application to the court for leave to act. The court must be satisfied that you have reasonable grounds for making this request. A director disqualification proceedings lawyer from our team can help you.
Director Disqualification proceedings lawyer
If the Insolvency Service or other UK authority is currently taking action against you as a director, we can help. We offer expert legal support to directors facing disqualification. We can advise you on how to get the best possible outcome.
We recommend that you contact us as soon as you receive a Section 16 letter. There are often very tight deadlines at play.