Directors Under Continued Attack? Likely Future Trends in Director Disqualification
In a previous article we looked at 8 key current trends which our Director Disqualification Solicitors have noticed over the last 12 months. In this article, looking deep into our crystal ball, we predict what we think might happen during the next 12 months in the world of director disqualification.
First, a Recap of the 8 Current Trends in Director Disqualification
We have identified (and discuss below) the following current 8 trends:
- CURRENT TREND 1 – New types of (allegedly) unfit conduct being investigated and pursued by the Insolvency Service (‘IS’) against Directors.
- CURRENT TREND 2 – IS investigating and pursuing Criminal law offences via the Director Disqualification route.
- CURRENT TREND 3 – IS pursuing Director Disqualification cases against Directors where the company is not even in a formal insolvency.
- CURRENT TREND 4 – Admissions made by Directors in (Civil) Director Disqualification proceedings coming back to haunt Directors in Criminal proceedings.
- CURRENT TREND 5 – IS investigating and pursuing allegations of unfit conduct relying upon unproven and disputed matters of fact.
- CURRENT TREND 6 – ‘What, no draft evidence?’
- CURRENT TREND 7 – Internal procedures within the IS – potential for actual conflict of interest.
- CURRENT TREND 8 – Breaches of Disqualification Orders and undertakings: ‘Go straight to jail’.
What Lies Ahead in Director Disqualification for 2019 and Beyond? Our Predictions
As specialists in Director Disqualification, these are some of the things that we think are bubbling under.
- FUTURE TREND 1 – Director Disqualification Compensation Cases
The Law has changed to allow for cases, where financial compensation is sought from the Director, in addition to his/her Disqualification. As yet, we have not seen a single such case brought by the IS. We anticipate however that we will see such cases during 2019. The Section 16 Letter currently tells the Director whether or not Compensation proceedings are anticipated. The answer so far has been ‘No’. We expect however to see such cases pursued in the coming months.
The IS and BIS employs and runs specialist teams of Criminal Investigators looking specifically at offences relating to corporate failures as we reported during 2017. We expect to see the number of Criminal cases against delinquent Directors (whether within Disqualification proceedings or generally) increase in the coming months, whether arising from, for example:
- Failing to maintain/preserve/deliver up company books and records.
- MTIC Fraud.
- Breach of existing Director Disqualification Order/Undertaking and/or aiding and abetting such breaches (NDP is presently instructed on 4 such cases).
- Fraud in anticipation of company winding up (section 206 of the Insolvency Act 1986 (‘the IA 1986’)) to include:
- Concealing the company’s property or concealing debts due to or from the company.
- Fraudulently removing the company’s property.
- Pawning, pledging or disposing of company property obtained on credit that has not been paid for.
- Transactions in fraud of creditors (section 207 of the IA 1986) to include:
- Causing or making a gift or transfer from company property.
- Concealing or removing any part of the company’s property.
- Misconduct in the course of winding-up (section 208 of the IA 1986)
Fear not however!
There are Statutory and Common Law defences that can be deployed and used in answer to many of the above alleged offences. The key is to deploy and use the defences to best advantage.
- FUTURE TREND 3 – Pursuing Director Disqualification cases against Directors where the company is not in a formal insolvency
We have addressed this in an earlier article. Such cases are pursued most commonly under section 8 of the CDDA. Again, we expect to see more such cases pursued in the last months of 2018 and 2019.
- FUTURE TREND 4 – Dissolved companies
We predict this will be a ‘biggy’! On 26 August 2018, the IS and BIS announced a:
‘….new crackdown on reckless Directors, specifically those who have dissolved companies to avoid paying workers or pensions.’
This announcement followed (perhaps inevitably) as a Government reaction to the BHS debacle. It is said that such Directors will be targeted for disqualification and fines. On the face of it, an overdue remedy for a perennial problem. How will it develop, however
Directors dissolving a company (rather than liquidating it) and being open to scrutiny to avoid paying creditors is a big problem that needs addressing. We expect to see many disqualification cases in 2019 arising out of dissolved companies, where creditors are left unpaid.
Conclusion – Contact Us if Threatened With Director Disqualification
The world of Director Disqualification law and practice remains a moving feast, and we expect to see many, if not all, of the above predictions come true in 2019. However, one thing that remains a constant is that every Director faced with a Director Disqualification investigation needs to obtain the right advice at the earliest point and thus needs to act decisively.
Acting positively, decisively and quickly will always help the cause of the Director under attack. Having the best legal advice available is the second part of that jigsaw.
There are lots of things the Director under attack can do. Each and all of the matters dealt with above, merit and deserve an article to themselves. NDP are extremely well placed to help in respect of all such matters – click here to see some testimonials.
If you are a director threatened with disqualifcation, please contact us or call us on 0121 200 7040. Our director disqualification solicitors will be happy to discuss and advise you on the best course of action. The initial conversation is free.