Service sheds light on director disqualifications - Palmers Solicitors

Service sheds light on director disqualifications

The government’s Insolvency Service has given an insight into director disqualifications and the reasons for the longest bans.

An article in the service’s latest newsletter, published on 13 August, focused on the ten per cent of director disqualifications that last ten years or more and why they were so lengthy. Among the contributory factors highlighted were:

  • involvement in a VAT fraud – one director of a mobile phone and computer component wholesaler was disqualified for 13 years and HM Revenue & Customs claiming more than £91 million in the company’s liquidation proceedings
  • other forms of scams – a director involved in misleading members of the public into parting with at least £1.7 million for small plots of land of little value ended in a 14-year disqualification
  • failure to promote the interests of the company concerned – the ex-director of a football club was disqualified for the maximum 15 years for failing to avoid a conflict of interest in the running of the club
  • acting as a director while already disqualified – as well as receiving a further lengthy ban, those involved may also face a prison sentence
  • falsifying information and misappropriating company funds – the director of two construction companies was banned for 13 years for misappropriating £830,534 of company monies.
  • failing to keep proper accounting records or deal with tax affairs properly.

The Insolvency Service added: “While the reasons why a director may be disqualified for a long period are many and various, we look at the facts of every case and will pursue those cases that merit it, no matter how complex they might be.”

The cases highlighted by the Insolvency Service are a useful reminder of the serious consequences of failure to comply with directors’ duties, not just for the individuals and their future career but also for the reputation of their businesses.

For directors who find themselves in this position, expert legal advice is essential. We can advise on the most appropriate way forward, which may include defending the proceedings or making a voluntary undertaking, which has the same effect as disqualification, but with the director usually accepting a shorter disqualification period than was being sought.

For expert advice on all aspects of Company Law, including in relation to directors’ responsibilities please contact BJ Chong.

Insolvency-related disqualifications are common, for example as a result of wrongful trading – allowing a company to continue trading when there is a risk that creditors will not be paid.

Our Debt and Insolvency team can provide comprehensive legal support for insolvency issues, including advice and representation in insolvency proceedings. For more information, please contact Andrew Skinner.