The impact of insolvency service director disqualification can last far longer than the disqualification period. It can severely damage your reputation among investors, suppliers, and consumers and permanently impede your career prospects. Accordingly, any proposals to disqualify you must be addressed with swift, decisive action to give you the best chance of avoiding disqualification or at least securing the most lenient terms.

At Altion Law, our specialist director disqualification solicitors regularly assist directors with all issues relating to director disqualification. We offer commercial, pragmatic advice and have a proven track record of securing excellent outcomes for our clients.

 

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 is Insolvency Service Director Disqualification?

The Insolvency Service plays a crucial role in upholding corporate accountability and protecting the public and businesses from unfit company directors. Among its most significant powers is the ability to seek the disqualification of directors whose conduct has fallen below the standards expected of them by law. Director disqualification prevents you from acting as company director or being involved in the promotion, formation, or management of a company for a specified period.

Disqualifications can last between 2 to 15 years, depending on the nature and severity of the director’s conduct. The purpose of disqualification is not to punish the individuals involved but to protect the public and ensure the integrity of the business community. It is designed to prevent directors found to have acted improperly from causing further harm.

 

When can a Director be disqualified?

The Insolvency Service may seek your disqualification from being a director if it considers that you have failed to comply with your legal responsibilities. For example, directors must exercise reasonable care, skill, and diligence when carrying out their duties, and avoid any direct or indirect conflicts of interest between the company and themselves.

Examples of the types of situations that may result in a director’s disqualification include the following:

  • Allowing the company to continue trading when it cannot pay its debts so is insolvent.
  • Failing to maintain proper accounting records.
  • Failing to file the relevant documentation with Companies House.
  • Not paying the tax owed by the company.
  • Using company assets for their personal benefit.

 

What is the Director Disqualification process?

We set out a general overview of the director disqualification process below.

  • Investigation: When a company goes into liquidation or administration, the insolvency practitioner must submit a report on the conduct of the directors. If misconduct is suspected, the Insolvency Service launches an investigation.

 

  • Notification: If the Insolvency Service identifies evidence of misconduct, it sends a ‘Section 16’ letter to the director, outlining the case against them and offering them the chance to respond or provide a disqualification undertaking.

If they give a disqualification undertaking, the director voluntarily agrees to refrain from acting as a director for the period proposed by the Insolvency Service. A disqualification undertaking has the same effect as a court order but avoids the need for court proceedings. It can be appropriate to give the undertaking if you accept wrongdoing and wish to resolve the matter quickly without court proceedings. However, you should never enter into this type of undertaking without first taking legal advice.

  • Court Action: If the director declines to give the undertaking, the Insolvency Service may issue legal proceedings against them. The court will then assess the evidence, and, if it concludes that the director has acted improperly, it will order their disqualification.

 

  • Enforcement: Once disqualified, the individual cannot act as a director without the court’s permission. Crucially, the scope of the ban covers any acts that amount to running a company, even if the individual has not been officially appointed as a director. Accordingly, you cannot seek to avoid the ban by acting as a ‘de facto’ director and providing instructions to others. Failing to comply with your disqualification is a very serious matter and may result in a fine or imprisonment.

 

How can we help with Insolvency Service Disqualification matters?

We offer advice and guidance on all areas of director disqualification, including the following:

  • Negotiating a withdrawal of the allegations against you.
  • Negotiating a reduction in the length of your disqualification when giving a disqualification undertaking.
  • Building a robust defence to the case against you and representing you in court.
  • If you are disqualified, advising you on the scope of your disqualification to ensure you do not inadvertently breach it and face a fine or imprisonment.
  • Applying to court for permission for you to undertake certain acts that would otherwise constitute a violation of your ban. The court may grant permission if your knowledge is irreplaceable and essential for the company to continue operating.

 

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.