When it comes to dealing with director disqualification proceedings, it is better to be as fully informed about the situation and the possible outcomes as quickly as you can. If you are a director with a company that has become insolvent, action may be taken by the liquidator against the directors. This could include the director facing a misfeasance proceeding or proceedings relating to wrongful trading. There could even be action taken by the Secretary of State if they have received a poor report from the liquidator relating to the behaviour of the directors for the period before the company entered liquidation.
If any element of wrongful trading can be found or proven, the directors could become liable personally for the debts. Depending on the severity of the issue and the level of debts, this could create a situation where you lose your home or end up bankrupt. Given the final outcome of director disqualification proceedings can be so severe, it is important to be aware of the potential outcomes and the dangers that arise from this style of case. There is no point in hoping everything will blow over because this will increase the likelihood of a negative outcome but by being proactive, it is possible to lessen the impact of any proceedings that are being undertaken.
The Secretary of State may take Action against you
When action is undertaken by the Secretary of State, successful proceedings will likely fall under the Company Directors Disqualification Act of 1986, CDDA. This act is aimed at stopping a director, who is alleged to have behaved in a way that contravened their main fiduciary duties. This can include wrongful trading. The penalties imposed from the Act can result in a person being unable to take the role of director in a limited company for up to 15 years.
Knowing the sort of actions that can result in these proceedings being initiated is important, and they include:
- Trading to the detriment of creditors when the firm was insolvent
- Not maintaining proper accounting records
- Not preparing and filing accounts
- Not making returns to Companies House
- Not submitting tax returns
- Taking an excessive wage when the firm was insolvent
- Issuing company cheques knowing that they would not be honoured
- Not co-operating with an administrator or liquidator
These are all actions that can have serious consequences and if you have been acting in this way, you are likely to face punishment of some sort. Clearly there are different levels of action relating to these behaviours and not every crime will be at the same level. However, each case is adjudged on its own merit, and it may be that there is a difference of opinion between the director who took the actions and the investigation team reviewing the action.
Seeking expert Legal Advice sooner rather later is better
This is why if you have acted in this manner, it is best to seek legal advice and guidance as quickly as you possibly can. The sooner you have the support of an expert relating to director disqualification, the more robust and reliable your defence will be. Not everyone who faces these allegations will lose their directorship, but it is fair to say that anyone not taking these allegations seriously will likely find themselves in greater trouble than they would normally think.
There are arguments and explanations that can be issued in defence of these allegations, and it may be that you can point to problems arising out with your control. In an insolvency event, it is common for firms to downsize their staff or lose key staff members, and this may seriously impact on the ability of a firm to operate in the normal manner. The loss of a major contract or misjudgement can all be used as reasons why certain poor actions have been taken. There will obviously need to be proof provided with respect to these actions, but it may be that there are mitigating circumstances which can be cited when facing these allegations.
If you are facing director disqualification proceedings, the sooner you face up to these allegations, the better. Hiring a professional solicitor trained and experienced in this field will make a massive difference to how you approach the case. There is never any guarantee of success but when you work with the experts, you will find that you have a better chance of being a winner.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.
