Director Disqualification Proceedings
If you are a director of an insolvent company, you may face investigation by a Liquidator or the Secretary of State. Disqualification proceedings can have serious consequences for your future role in business. We provide clear, practical advice to help you understand the risks, respond effectively, and move forward with confidence.
Investigations following insolvency
When a company becomes insolvent, the conduct of its directors is reviewed. The Secretary of State may also take action following an adverse report on the director’s conduct before liquidation.
What director disqualification means
Disqualification proceedings aim to prevent an individual from acting as a director of a limited company for a set period. Disqualification can last up to 15 years, depending on the seriousness of the allegations and the circumstances involved.
Covid Bounce Back Loan (BBL) issues
Incorrect applications for Covid Bounce Back Loans, or misuse of funds after receipt, may lead to investigation. Directors are expected to demonstrate that the application process was truthful and inline with the terms and conditions of the application. As well as demonstrating the funds were used appropriately and in line with the intended purpose of supporting business continuity.
Company records and filings
Directors are responsible for maintaining accurate accounting records and ensuring company accounts and returns are filed on time. Failure to meet these obligations may form part of a disqualification investigation.
Tax obligations and HMRC
Failure to submit tax returns or pay liabilities owed to HMRC can lead to further scrutiny. Directors are expected to ensure tax affairs are managed correctly, even during periods of financial pressure.
Co-operation with insolvency practitioners
Directors must co-operate with a Liquidator or Administrator throughout the insolvency process. A lack of co-operation may influence the outcome of any investigation and increase the risk of disqualification.
How we support you
These are all examples of conduct that may lead to director’s disqualification proceedings. We have extensive experience advising on director disqualification and misfeasance claims. We can assess the strength of allegations, support you throughout proceedings, and negotiate the best possible outcome, including applications for permission to act as a director again where appropriate.
Questions we’re often asked
Yes. Following insolvency, the officeholder is required to submit a report to the relevant authority (the Insolvency Service in England and Wales) on the conduct of the directors. If a director's conduct is found to be unfit, they may be disqualified from acting as a director for a period of between 2 and 15 years under the Company Directors Disqualification Act 1986. Matters considered include the extent of the director's responsibility for the company's insolvency, failures to maintain adequate accounting records, breaches of statutory obligations, and the extent to which the director's conduct has harmed creditors.
Yes, shadow directors (individuals which exercises significant influence within the company and upon providing directions or instructions, the formal directors are accustomed to act) and de facto directors (individuals who assume the role of director without formal appointment) can also subject to disqualification proceedings. This is particularly relevant where parent companies, dominant shareholders, or advisers exercise significant control over an insolvent subsidiary's affairs.
If a Disqualification Order is granted, the Secretary of State can seek a further order that the director pay compensation for loss caused by their misconduct in connection with the insolvent company
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