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Case Study: How we helped a client avoid Director Disqualification in a Covid-19 related tax debt liquidation

This case study shows how we were able to convince the Insolvency Service (‘IS’) to drop its Director Disqualification investigation into our client’s conduct as a Director. With the threat hanging over him for nearly a year and the very real stresses that entailed, this case study demonstrates that it is the Director who lived and knows all the circumstances leading up to the liquidation that then led to the investigation, and not the IS.

It is for the Director under attack to use that information to best advantage in communications with the IS.

The reason for the IS’s investigation

In this case, our client had liquidated his company because of Covid trading restrictions and the uncertainty caused by them.  His business evaporated because of Covid.  The liquidation prompted the IS to write to our client, telling him that they intended to commence a Director Disqualification investigation into his conduct as a Director of the liquidated Company.

Their stated initial area of investigation was the Director’s behaviour in clearing off his outstanding Director Loan Account (‘DLA’), using accrued income at a time when the company had outstanding Tax liabilities.

The letter received from the IS threatening Director Disqualification was a stressful event, as our client had enjoyed an unblemished professional record over an accomplished career. He knew that disqualification from acting as a Director could well prevent him from continuing his career, not least because of the consequential reputational damage.

The Director contacted our expert Director Disqualification Solicitors

After recognising he needed expert help, he contacted Neil Davies and Thomas Riley here at NDP. We were able to instantly put him at ease and explained the steps and strategy that we should take to try and resolve the queries of the IS.

The IS‘s response

The IS initially took a strong stance maintaining that our client’s conduct was ‘unfit’ and they made it clear they were going to pursue him and try to obtain an order from the Court to get him disqualified from acting as a Director. We knew, however, that at this point, the IS had not heard his side of the story. Neil and Thomas made it clear to our client that the IS, as strangers to what went on in the company, needed to hear his explanations.

Neil and Thomas listened to his story and drafted detailed letters of representations to the IS, urging them to consider (as they must do) all the circumstances of the case. The letters drafted by Neil and Thomas provided a meticulous and thorough breakdown of the events which led to our client’s company failing.  The company failed through no fault of the Director.

NDP’s letters met the IS allegation of ‘Unfit Conduct’ head on and explained why our Director client had in fact acted appropriately when he made the decision, backed by the advice of an external Accountant, to write off the company’s outstanding DLA using accrued income due to the Director. This had the effect of reducing the balance of the loan account to zero (this was the specific matter complained of by the IS) and in doing so reduced the company’s overall Tax liabilities.

‘Stage 2 followed’ – a face-to-face Zoom meeting with the IS – which produced the positive result we wanted for our client

Despite this, the IS still wanted to pursue an application for disqualification. Neil and Thomas suggested to the IS a physical/face to face meeting with the IS to explain why this was not a case where disqualification should be pursued.

The Zoom meeting with the IS went very well. Neil and Thomas have significant experience of such meetings and were able to credibly rebut all of the IS’s allegations. After the conclusion of the meeting, NDP received confirmation from the IS that its investigation had ended, so that the Secretary of State did not now propose to take disqualification proceedings against our client.

This was exactly the result our client needed. At no stage did he feel that he had done anything wrong and our job was to intervene on his behalf and deliver a firm, calm and measured approach to the IS, which, in turn, removed a lot of the stress our client had been feeling for over 12 months.

This case study demonstrates that even when the IS is taking a strong line, Director Disqualification can be avoided, by:

  • Challenging the draft relied upon being used by the IS.
  • Setting out the evidence in the Director’s favour to undermine and oppose the IS’s case.


Only the Director knows what truly went on in a liquidated company. The Insolvency Service (like the Liquidator) are strangers to such events. The Director must tell his story in the most compelling way.

Often, he will need expert advice from Solicitors experienced in Director Disqualification and insolvency work, as NDP is, to do that. Above all, we find it is important to remind the IS  that companies can and do fail in the absence of delinquent behaviour, and it should not always be presumed that there has been unfit conduct by the Directors.