Key Message – This case study shows the importance of getting it right first time.
Liquidators and the Insolvency Service routinely invite Directors to complete Questionnaires about the liquidated company, its trading, its creditors, its debtors and all manner of things, to include pointed questions about solvency issues. This Director’s Questionnaire may appear innocuous. It is anything but. Answers from the Director will be relied upon and used against the Director when appropriate, and a director disqualification or a Court issued claim from the Liquidator could be the result.
Great care must be taken in completing the document, as this case study shows, in which a Director Disqualification Investigation (‘DDI’) was instigated by the Insolvency Service involving a Bounce Back Loan
A recent Director Disqualification case involving a Bounce Back Loan
NDP’s Sukhbir Mall and Tom Clinton recently acted for a Director, who had been asked to complete a Director’s Questionnaire by the Insolvency Service. After a discussion with the client to gain a full appreciation of the trading history and reasons for the failure of the company, Sukhbir and Tom were only then able to assist the client with the preparation of answers to the Director’s Questionnaire. This work later persuaded the Insolvency Service to abandon their Director Disqualification investigation.
The details of the case
The Insolvency Service had begun an investigation into the client’s conduct as a Director of a company that had entered insolvent liquidation, owing a £50,000 Bounce Back Loan (‘BBL’).
To kickstart their disqualification investigations, the Insolvency Service will often ask Directors of companies that have entered insolvent liquidation to complete a Director’s Questionnaire to determine whether an allegation of Director misconduct, worthy of a Disqualification Order being imposed can be made out. The questions asked may seem straight forward and innocuous, but Directors all too often find themselves facing further investigation or even disqualification proceedings being issued against them, due to avoidable mistakes and admissions being made in Directors’ Questionnaires. Those mistakes can be amended later, but often at significant financial cost.
Directors need to be aware of the professional and/or financial detriment that can be caused by avoidable mistakes being made when completing a Director Questionnaire.
This recent case highlights the benefit of approaching Director Questionnaires with great care.
Having been asked to complete a Director Questionnaire by the Insolvency Service and being unsure how to approach the matter, the client sought advice from NDP’s experienced team who advise clients facing Director Disqualification investigations and Court proceedings on a regular basis. We have a record of achieving good outcomes for Directors.
Enquiries of the Insolvency Service by NDP
Upon NDP’s instruction, Sukhbir and Tom engaged with the Insolvency Service immediately and requested all of the evidence that had been obtained during the course of the Insolvency Service investigation to date. It was this information (and for example, the Statement of Affairs of the company) that enabled NDP to understand what the Insolvency Service knew already, and more importantly what they did not yet know. We were able to give context and justification for the conduct of our Director client.
While the truth must be told in Directors’ Questionnaires, care must be taken to address the Insolvency Service’s concerns. Identifying those concerns and giving context to the explanations of the Director is vitally important at this early point.
In this specific case, the Insolvency Service were keen to explore the circumstances in which the company in question had obtained and used BBL funds. NDP advised the client that disclosing evidence that BBL funds were obtained and used correctly would assist in persuading the Insolvency Service that it would not be expedient in the public interest (the legal test in disqualification matters) to seek to disqualify the client from acting as a Director of a limited company for a period of between 2 – 15 years.
The Insolvency Service decided not to continue the Director Disqualification investigation
Having tailored the responses to the Director’s Questionnaire and disclosed documents in support of the client’s position (always a key factor), the Insolvency Service were faced with a decision as to whether it was in the public interest to continue their investigation or not. They ultimately decided not, and notified the client that they would not be continuing with their investigation.
The client was overjoyed and expressed thanks for Sukhbir and Tom’s hard work from start to finish, commenting that he could not be happier with the service that was provided by NDP.
The client said:
The client is now free to continue being a Director, without the cloud of a Director Disqualification investigation looming over him.
‘Thank you for the absolute care, technical abilities and concern that Sukhbir and Tom showed me through a terrible event in my life. I will be eternally grateful!’
Contact us if facing a Director Disqualification investigation.
This case study shows the importance of getting it right when it comes to the Director’s Questionnaire. This can – and does – lead to the Insolvency Service not continuing with the investigation.
If you, or a client, are facing a DDI and are presented with a Director’s Questionnaire, contact us, or call us on 0121 200 7040 for a free of charge initial discussion. The sooner you get in touch, the quicker we can get down to work.