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Alleged Breach of Director Disqualification Successfully Defended

Client Testimonial: “Without your guidance and expertise I would surely have failed in getting these director disqualification  allegations overturned.”

In this case, our client who was already serving a 4-year voluntary director disqualification undertaking, was investigated by the Insolvency Service (‘IS’) for allegedly breaching this undertaking. This was a very serious charge, which if proven, could have resulted in a custodial sentence for our client. Suky Mann, one of our director disqualification solicitors, explains how we were able to successfully defend our client, leading to the IS dropping the case. As ever, it is the facts of each case that really count.

Director Disqualification

Background to this director disqualification case

In 2017 we began representing a director of a construction Company that had gone into liquidation owing creditors over £215,000, £200,000 of which was due to HM Revenue & Customs (‘HMRC’).  Shortly after liquidation, the Insolvency Service (‘IS’) commenced an investigation into our client’s conduct, alleging that he had caused or allowed the Company to trade to the detriment of HMRC.

On the facts presented to us, we recognised early on that disqualification was inevitable. Rather than allow our client to engage in protracted and expensive litigation, we advised that he should offer a voluntary disqualification undertaking. Following negotiations, we were able to reduce the period of disqualification sought from 6 years to 4.  Our client was pleased with the result, and vowed to put the Company failure behind him, taking up paid employment in another construction company.

The Allegation of a breached Director Disqualification undertaking

Fast forward 3 years. Sukhbir Mall of Neil Davies & Partners received a frantic call from the same client. The Company he was working for had been placed into liquidation, and the IS alleged that he had been involved in the ‘management’ of the this company, in direct breach of his existing director disqualification undertaking.

Our client had real cause for concern. If found to have acted in breach, he was facing a fine or up to 2 years imprisonment or both. It was a serious situation.

The Law

Section 13 of the Company Directors Disqualification Act 1986 provides that:

“If a person acts in contravention of a disqualification order or disqualification undertaking or in contravention of section 12(2), 12A or 12B, or is guilty of an offence under section 11, he is liable….

  • on conviction on indictment, to imprisonment for not more than 2 years or a fine, or both; and
  • on summary conviction, to imprisonment for not more than 6 months or a fine not exceeding the statutory maximum, or both.’

The IS alleged that the actual director of the Company our client was working for was nothing more than a stooge, with our client interposed to run the business in contravention of his disqualification undertaking. Despite the IS’s confidence and vigour with which it pursued the investigation, it was immediately apparent to Suky that the IS was operating on nothing more than supposition and inferences, rather than hard evidence.

We worked hard to produce a robust defence

Sukh worked closely with our client and the director of the Company and was able to produce evidence demonstrating that there had not been a breach. The IS had no choice but to concede that its allegations were ill-founded and promptly concluded its investigations with no further action being taken against our client.

With less than 8 months left on his undertaking, and no further threats of civil action criminal prosecutions, our client can look to finally draw a line under matters.

What our client had to say

“I would like to thank you for all the hard work you have put into this case. I am extremely grateful for your support and diligence in creating a sound and robust defence to the allegations put to me by the Insolvency Service. This has been a very traumatic time for me, so I am even more convinced that without your guidance and expertise I would surely have failed in getting these allegations overturned.”

What this case tells us

Sometimes the IS’s narrative of a serial offender simply does not fit the facts of the case, and often director disqualification or a criminal prosecution for alleged breach of an undertaking is neither appropriate nor warranted.

Here at NDP we have the expertise and experience to deal with complex cases, such as this one. Our aim is always to bear the strain for our clients and achieve the best possible outcome.

Contact us if threatened with director disqualification

If you are facing an investigation for a breach of a Director Disqualification undertaking or order, please contact us or call us on 0121 200 7040 for a FREE initial chat