Director disqualification

We have a highly experienced, specialist team with a proven track record of assisting directors facing proceedings for disqualification.

Instructing us means you will get experienced help in :-

• advising you whether you have reasonable prospects of successfully arguing that a disqualification would be unnecessary and/or disproportionate.

• where appropriate, seeking to reduce the length of any disqualification order as much as is possible.

• representing you if you have been disqualified and a further claim is made that you are in breach of the order in some way such as acting as a shadow director.

Reasons a director can be disqualified

Company directors can be disqualified for serious incompetence, financial impropriety or where there have been deliberate acts which are unlawful or illegal.

In addition to being disqualified, depending on the underlying reason, directors may be held personally liable financially for losses resulting to the company or creditors and in very serious cases, may be criminally liable.

Under the Company Directors Disqualification Act 1986 any person may report a director and assert that he or she should be investigated.

Situations where directors are at risk of disqualification generally include :-

• Wrongful trading in the lead up to insolvency - the most common way this happens is where directors allow the company to continue trading when it is insolvent, misuse of bounce back loan funds, unlawful dividends or inappropriate director loan accounts use.  Where there is fraudulent intent, this is even more serious. When an Insolvency Practitioner is appointed, he or she has a duty to consider directors conduct.

• Failure to prepare and/or submit the company's statutory accounts - the types of accounts which must be filed will depend primarily on the turnover of the business, with the vast majority of SME businesses, only being required to submit abridged accounts.

• Where the company's accounts are inaccurate.

• Misuse of company assets - where a director uses company money or assets for their own benefit.

• Failing to co-operate - where a director fails to co-operate with an appointed Insolvency Practitioner or the Official Receiver.

Implications of being disqualified as a director

Even after the disqualification period ends, the repercussions often continue and typically include :-:

• Disclosure Requirements - even after the disqualification expires, you may be obligated to disclose it in certain situations, potentially limiting future employment opportunities, and particularly at executive levels.

• Restricted Business Activities - disqualification can restrict your involvement in specific regulated businesses, especially financial services or regulated businesses, hindering your employment options.

• Funding Challenges - if you set up a new business after your disqualification ends,  Securing funding for a new company is likely to be much more difficult due to the past disqualification. Traditional lenders may be wary, and you might encounter stricter requirements.

• HMRC Scrutiny - disqualification can raise red flags for HMRC, making them more likely to request bonds (guarantees) for your company's PAYE (payroll taxes) and VAT (sales tax) payments.

Negotiating with the Insolvency Service

Whilst there is no UK equivalent of a US style plea bargain, it is possible to try and agree a less damaging categorisation of ban and this is something we can assist with.

The Insolvency Service can recommend to the Secretary of State that it is in the public interest to agree that the disqualification period should be in a certain bracket. The seriousness of wrongdoing is categorised :-

• Lower bracket - 2-5 years disqualification

• Middle bracket - 6-10 years disqualification

• Higher bracket - 11-15 years disqualification

Facing possible disqualification? Here's what to do

• Insurance Coverage - As a first step, check whether you may have existing insurance policies that might cover legal costs associated with potential disqualification proceedings.

• Co-operate with investigation - The best chance of avoiding disqualification lies in promptly engaging with the investigation before a decision is made. Remember, the investigators are experienced – seemingly simple questions can contain hidden complexities.

• Seek Legal Advice - Experienced lawyers will help you understand the investigation process and ensure you're appropriately represented. Attending a meeting without legal support can be detrimental to your case.

Please do get in contact.