Director Disqualification Remains High But is Not Inevitable.
Director disqualification remains at high levels in the country, with the Insolvency Service reporting that they disqualified more than 1,200 directors in the financial year 2015/16, about the same number as in 2014/15. This article looks in a little more detail about how the Insolvency Service works and suggests that from our perspective, director disqualification is not inevitable once an investigation begins.
How the Insolvency Service Works
The Insolvency Service, as a government body, acts to disqualify directors in the public interest. The reasons for director disqualification are many, but they almost always start with an allegation of unfit behaviour emanating out of insolvency.
In every case of insolvency, the cause of the company’s failure is examined by the Insolvency Service, and if director misconduct is proven, they have the power to impose a director disqualification period of between 2 and 15 years. They can also use the powers under the Companies Act 1985 to carry out confidential fact-finding investigations into the activities of solvent/live limited companies, and will aim to wind-up those companies who are acting against the public interest.
The Majority of Director disqualifications are for non payment of Crown Debt
In our experience, the majority of director disqualifications – perhaps as many as 70% – come as a result of an inability to pay Crown Debt. Also known as trading to the detriment of the Crown. Put another way, this means running up debts with HMRC for the non-payment of PAYE, NI, VAT and Corporation Tax. Although the Insolvency Service states that the average amount owed in a Crown Debt Disqualification case is c.£975,000, we believe the figure is much lower – perhaps £200,000 or less.
However, there are many other ways for directors to be disqualified, as the following list from the Insolvency Service Shows:
Director Disqualification for Employing Illegal Workers
During 2015/16, 47 directors were disqualified for employing illegal workers, for an average of over 6 years per director. Ignorance of the law is no defence. Click here for a recent news story.
Director Disqualification for Mis-selling
In this case from March 2016, where the public interest was particularly high on the agenda, a director of an investment company was disqualified for 14 years for mis-selling £500,000 worth of rare earth metals, which proved to be worthless as investments to the public.
Director Disqualification for Pensions Fraud
In this case from November 2015, a director was disqualified for 12 years for ‘facilitating a pension fraud by failing to ensure that the company he controlled met its obligations to its defined benefit pension scheme. This was a particularly serious case because the pension fund, in which there were over 500 members, suffered a loss of over £26 million.
At NDP We Specialise in Defending Directors Threatened with Disqualification
Our Director Disqualification Solicitors are experienced in defending directors who are threatened with disqualification. We know how the Insolvency Works, what they are looking for and how to mount an effective defence. We know from experience that disqualification is not inevitable. Have a look at some of our testimonials.
We know that acting quickly and positively as soon as the Insolvency Service opens a director disqualification investigation is vital. Our aim is always to eliminate the prospect of disqualification or reduce the length of the disqualification, and the chances of us achieving these aims are increased the quicker you talk to us.
If you are being threatened with director disqualification, contact us or call us on 0121 200 7040 for a free initial discussion of the options that are likely to be available to you.