Extended Director Disqualification Undertaking Period for Breaching Existing Disqualification
This article looks at a case where Richard Brown from Cirencester recently accepted an 11 year Director Disqualification undertaking from the Secretary of State for Business, Energy and Industrial Strategy. This was in addition to an existing 6 year ban that he was already serving. It reinforces the point that whilst disqualified as a director, unless specific permission has been received from the Court, the person with the disqualification cannot:
- Act as a company director
- Take part, in the formation, management or promotion of a company or limited liability partnership, either directly or indirectly
- Be a receiver of a company’s property
The Details of This Director Disqualification Case
Mr. Brown’s initial disqualification started in March 2011, and related to his previous company, Richard Brown Holdings Limited (RBH), a house builder, which had entered liquidation in June 2009.
In full knowledge of the restrictions placed upon him by his disqualification, Mr. Brown continued to act as a director of another company, Door Stores (Swindon) Limited, a retailer of doors and related fixtures. He did so without permission from the Court.
Director Disqualification investigations by the Insolvency Service usually take place at liquidation, especially when a company has been ‘trading to the detriment’ of HMRC. Mr. Brown’s breach of his disqualification undertaking came to light when Door Stores went into liquidation, owing £198,942 to HMRC, which prompted an Investigation by the Insolvency Service.
As a result, Mr. Brown was disqualified from acting as a director for a further 11 years, for breaching his initial ban and for causing Door Stores to trade to the detriment of HMRC. His 2 co-directors at Door Stores were given a director disqualification undertaking for 3 years and 6 months, respectively, for causing Door Stores to trade to the detriment of HMRC.
Comment on this Director Disqualification Case
The severity of the punishment handed out to Mr. Brown compared to his fellow directors at Door Stores shows how seriously the Insolvency Service views the breaching of a director disqualification undertaking.
Mr. Brown had the option of applying to the Court for permission to act as a director whilst disqualified. Whether or not this would have been successful we cannot comment on, not being in permission of the full facts of the case. Had such an application been successful, however, then it is likely that Mr. Brown’s disqualification period would have been more in line with that of his fellow directors at Door Stores. Under these circumstances, his offence would have been for allowing Door Stores to trade to the detriment of HMRC – in itself a serious offence – without being compounded for acting as a director whilst still disqualified.
Contact us if Threatened With Director Disqualification
Our director disqualification solicitors are experienced in defending directors faced with disqualification, following Insolvency Service investigations. Click on these links to see some of our case studies and testimonials.
The outcome depends on the details and facts of each case, but we have had much success in either reducing the length of the disqualification period, or in convincing the Insolvency Service to drop the investigation.
If you are being threatened with director disqualification, please contact us or call us on 0121 200 7040 for a FREE initial discussion. The sooner you make contact, the more we can do to help.