If the Insolvency Service wishes to disqualify you as a director for misconduct, they must do so within a specific timeframe. Here, our director disqualification solicitors discuss the circumstances in which you can be disqualified from being a director, the legal process involved, and the director disqualification time limit.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
What does Director Disqualification mean?
If a company goes into liquidation or administration, the insolvency practitioner will investigate its affairs. If any of the company’s directors are found to have acted improperly, the Insolvency Service may seek to ban them from acting as directors for a specific period of time.
When can you be Disqualified from acting as a Director?
You can be disqualified from acting as a director for a number of reasons, some examples of which we set out below. Your conduct need not have been deliberate to expose you to a risk of facing disqualification; you can be disqualified for negligence as well.
Some common reasons for individuals facing disqualification from being a director are as follows:
- Continuing to trade when the director knew that the company was insolvent.
- Failing to ensure the company paid its tax or seeking to avoid tax liabilities.
- Failing to file the required documentation with Companies House.
- Using company money or assets for their own benefit.
- Failing to cooperate with the insolvency practitioner.
What is the Director Disqualification process?
If the Insolvency Service decides to investigate your conduct as a director, they may send you a questionnaire asking for information about the company’s affairs and why it became insolvent. You may also be asked to answer questions about matters with which you were specifically involved.
If you receive a questionnaire of this nature from the Insolvency Service, you should seek immediate legal advice. The Insolvency Service has not yet decided to pursue your disqualification, and how you answer its questions can significantly influence how it proceeds.
If, following receipt of your answers to its questionnaire, the Insolvency Service still believes you acted improperly as a director, it may issue legal proceedings against you, seeking your disqualification. It will inform you of its decision and the disqualification period it considers appropriate in your situation. At the same time, it will ask whether you wish to enter into a ‘disqualification undertaking’ whereby you voluntarily agree to refrain from acting as a company director for the period suggested by the Insolvency Service. You should neither agree nor refuse to enter into this undertaking without taking legal advice first.
If you decide against providing a disqualification undertaking and have not convinced the Insolvency Service that your behaviour was appropriate, it will likely proceed with its claim. If it succeeds, you will be disqualified from acting as a director for a specific period. You may also have to pay the Insolvency Service’s legal costs.
What is the Director Disqualification time limit?
Director disqualification proceedings against directors of insolvent companies must be issued within three years of the date of the company’s insolvency.
How long can you be Disqualified for?
You can be disqualified for a maximum period of 15 years. The length of your ban will depend on the circumstances of your case. We set out the usual periods of disqualification below:
- Disqualification for low-level misconduct, such as that arising from an error in judgment as opposed to intentional wrongdoing, is usually between two and five years.
- Disqualification for mid-level misconduct, such as that arising from more serious wrongdoing, is usually between six and ten years.
- Disqualification for high-level misconduct, such as that involving fraud or another type of criminal behaviour, can be up to 15 years.
How can you defend Director Disqualification proceedings?
The impetus behind director disqualification proceedings is to protect the public by removing individuals from the business community for a period of time. If you can prove that you do not represent a threat, for example, because you had not acted deliberately or irresponsibly in taking the action you did, you may be able to successfully defend any director disqualification proceedings brought against you. Alternatively, you may be able to argue that the conduct in question does not warrant disqualification.
Our specialist director disqualification solicitors have vast experience in defending directors facing disqualification. We will work tirelessly to build a robust defence to the claims made against you and use the evidence to negotiate a settlement or defend the matter in court. We offer cost-effective legal advice with a commercial focus and will do all we can to ensure a swift resolution on the best possible terms.
For a confidential free discussion, call us today on 01908 414990, alternatively email us at Hello@altion-law.co.uk or complete our Free Enquiry Form and we will call you back.
