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.
How long does the Insolvency Service have to disqualify a director?
If questions are raised over a company director’s conduct, the Insolvency Service may choose to pursue an investigation. If there is any evidence of unfit conduct, the Insolvency Service will start proceedings to get that director disqualified.
But how long does the Insolvency Service have to raise proceedings?
The answer depends on the company’s status.
There is no time limit for live companies. A live company is one which is currently trading, as opposed to a dissolved company, or one which is going through insolvency proceedings.
The Insolvency Service normally investigates the director of a live company after allegations of wrongdoing are reported. Such allegations are typically reported by creditors, although may come from a member of the public, a shareholder or someone else within the company.
Dissolved or insolvent companies
The Insolvency Service has three years to raise proceedings against the director of a dissolved company. The three-year time limit starts from the date the company was dissolved.
Similarly, the Insolvency Service has three years to raise proceedings against the director of an insolvent company. The three-year time limit starts from the date the company began the insolvency process.
Where a company is going through formal insolvency proceedings, the insolvency practitioner prepares a report, part of which deals with the director’s conduct. If there is any evidence of wrongdoing, it may trigger an Insolvency Service investigation. This can then lead to Director Disqualification proceedings.
Where a company has been dissolved without a formal insolvency process, the Insolvency Service is dependent on complaints being raised by creditors or other parties.
Change in the law
The powers of the Insolvency Service changed significantly under the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021, which came into effect on 15 February 2022.
Before the new Act, the Insolvency Service was only allowed to investigate directors of live companies. If the company had already been dissolved, the Insolvency Service had to restore the company to the register, after which Director Disqualifications could be raised.
This process was costly and time consuming for the Insolvency Service. There were also concerns that directors were dissolving companies, rather than go through formal insolvency proceedings, in order to avoid the Insolvency Service’s attention. The new Act therefore removes this obstacle, allowing the Insolvency Service to investigate directors, even if the company has been dissolved.
The Act applies retrospectively, so the director of any company dissolved within the past three years is at risk of investigation.
How long can a director be disqualified for?
A director can be disqualified for up to 15 years. The minimum time limit for Director Disqualification is two years.
Where a director is found guilty of:
- Reckless or negligent conduct – the disqualification is usually between 2 to 5 years
- Serious misconduct – the disqualification is usually between 6 to 10 years
- Serious unfit conduct including dishonesty – the disqualification is usually between 11 to 15 years
Get expert legal advice
If the Insolvency Service 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.
If you have already been disqualified, we can also help you get leave to act as a director from the court. Permission will only be granted if you have good reason for your request. We can assess your eligibility and make representations to the court on your behalf.