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Where a limited company has entered into any insolvency process, the Insolvency Practitioner must report on the conduct of the directors to the Insolvency Service. This can result in the Insolvency Service making enquiries of the directors about their conduct whilst running the business. This can lead to claims brought against directors by the Secretary of State for Business, Innovation and Skills seeking to disqualify them as directors.
If the former director’s conduct makes them unfit to be involved in the management of a limited company, then the Secretary of State will seek to negotiate a disqualification undertaking with that director, or seek a disqualification order from the court. Any disqualification can be from 2 to 15 years.
Certain conduct may lead to disqualification, for example:
- Trading to the detriment of creditors at a time when the company was insolvent and unlikely to be able to return to solvency
- Failure to keep proper accounting records
- Failure to prepare and file accounts or make returns to Companies House
- Failure to submit tax returns or pay tax to HMRC
- Failure to co-operate with the Insolvency Practitioner
What we can do to assist you
Bell Lax are able to provide advice and support throughout the process.
We are able to engage in correspondence with the Insolvency Service to address any points in respect of your conduct. The Insolvency Service may decide against starting court proceedings against you if you are able to persuade them that you did not engage in conduct rendering you unfit to be concerned in the management of a limited company.
We can assess the merits of any claim brought against you and advise you on your options.
We can defend disqualification proceedings brought against you.
We are able to negotiate an undertaking with the Secretary of State which may enable you to continue acting in the management of the company, but subject to certain conditions.
If we consider that a disqualification order is likely, we can negotiate the terms of an undertaking which may reduce the period of disqualification.
At Bell Lax we recognise that each business is different; the approach that is suitable for a director of one business may be entirely different for another business. We are able to tailor our advice to suit your individual circumstances. In particular, we can consider the most cost effective option for you, including whether to negotiate an undertaking with the Secretary of State.
What happens if you are disqualified?
If you have been disqualified as a director, you may not act as a company director (or LLP member) or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company. The sanction for breaching a disqualification order is imprisonment and/or a fine.
However, you may be able to continue in the management of a company if you have permission from the court.
Bell Lax may be able to help you obtain permission from the court to continue being involved in the management of a company after a disqualification order has been made.
If you have been contacted by the Insolvency Service about the affairs of an insolvent company which you held a directorship in, you need to act promptly. Any delay or failure to co-operate may make things worse for you.
If legal advice is sought promptly, you will have a greater opportunity to seek to prevent proceedings against you, or at least seek to reduce any potential disqualification period.
If you would like to discuss how Bell Lax can help you, please contact us.