A tougher disqualification regime for directors is on the way, including in insolvency situations.
The Small Business, Enterprise and Employment Act 2015, which received Royal Assent on 26 March, contains wide-ranging measures on issues including access to finance, public sector procurement, employment and pubs.
Measures are being introduced over several months, with those relating to director disqualifications expected to take effect in April 2016.
Under current law, an office-holder – the official receiver, liquidator, administrator or administrative receiver – must submit a report to the Business Secretary if it appears that the conduct of a director makes them unfit to be involved in running a company.
The new legislation will require the office-holder to submit a conduct report on every director of a company that becomes insolvent, describing any conduct that may help the Business Secretary decide whether it is in the public interest for a director to be disqualified.
The courts will also be able to take into account conduct in relation to overseas companies when deciding on disqualification applications involving the director of an insolvent company.
A restriction on the type of investigative material that the Business Secretary can use in deciding whether to bring disqualification proceedings against a company director has also been removed, enabling any relevant information to be taken into account.
And the time period in which the Business Secretary can apply for the disqualification of an unfit director has been extended to three years from when the company became insolvent, rather than three.
Director disqualifications, which can last for up to 15 years, are imposed in cases of unfit conduct, including allowing a company to continue trading when it cannot pay its debts, not paying tax owed or using company money or assets for personal benefit.
Expert legal advice is essential for directors facing disqualification. At Palmers, we can advise on the most appropriate way forward. As well as defending proceedings, we can advise on making a voluntary undertaking, where a director might accept a shorter disqualification period than was being sought. For more information, please contact Andrew Skinner.