Our Director Disqualification Specialists Convince the Insolvency Service to Abandon the Case

As we predicted some months ago, the Insolvency Service and company Liquidators are seeking to recover COVID Loans and COVID Grants from Directors personally, where the company falls into formal insolvency after the Loans/Grants have been taken.

We are seeing many such cases come across our desk, some with merit but many without merit or grounds. There is a perception that the use of a COVID Loan or Grant, and subsequent liquidation of a business, may well lead to a disqualification as a Director. However, in this real-life case history, we hear from our clients who had the threat of director disqualification proceedings against them, as husband and wife, abandoned following the intervention and involvement of two of our insolvency Solicitors, Neil Davies and Kunal Bhalla.

This testimonial demonstrates that use by a company of COVID Loans and Grants, followed by insolvency and liquidation of a company, does not necessarily or automatically mean that disqualification proceedings will follow. The contrary is often the case. Click here to see more testimonials.

Director Disqualification

The Details of this Director Disqualification case

Following the liquidation of our clients’ business, the Insolvency Service wrote and told our clients that they intended to pursue a Director Disqualification investigation and their initial areas of investigation included:

  1. An alleged misuse of Government Loans; and
  2. Transactions to the detriment of creditors.

There were also Parallel Proceedings

Those same allegations had been made against our clients in a separate litigation claim threatened against them by the Liquidator of their business. That separate matter settled without the need for Court proceedings to be issued against our clients, avoiding legal costs exponentially rising for them in also dealing with that matter.

The important bit – act quickly

It was imperative that the allegations that were raised against our clients were dealt with at the earliest possible opportunity. That is where our director disqualification specialists stepped in. Neil and Kunal spent many hours with the clients, understanding what had happened in the company, why decisions were made and setting out the full and true picture of events to the Insolvency Service. The outcome? The Director Disqualification investigation was abandoned.

Only the Directors know all of the circumstances of the case

It is easily overlooked that the only people with a full and complete picture of what happened in their company are the Directors, and not the Insolvency Service. They ‘lived’ the story and are therefore uniquely placed to give to the Insolvency Service details of all the circumstances of the case. As a stranger – and latecomer – to matters, the Insolvency Service will not have that detail. It is vitally important that nothing is missed out of the factual and historical matrix by the Director, when dealing with the Insolvency Service, which is why we always spend as much time as is needed to find everything out.

Our Director Disqualification comment

“Matters such as this should not be assessed by the Insolvency Service solely with the benefit of hindsight. The Insolvency Service must however be given the full facts by the targeted Directors, to enable the Insolvency Service to make a truly informed decision.

On the facts of this case, at the time decisions were made by our Director clients (then criticised by the Insolvency Service), they had found themselves in unprecedented market conditions which seemingly changed on a daily basis as COVID-19 trading regulations were announced and were changed. But for COVID-19 and the trading restrictions imposed by the Government, our clients very successful business would have continued trading.”

Our Clients’ Reaction

“We are delighted and relieved at the outcome of the two investigations into our conduct and very grateful to Neil and Kunal for their expert guidance and assistance throughout.”

Key points arising out of this Director Disqualification case

  • Use by a company of COVID Loans and Grants, followed by liquidation of a company, does not necessarily or automatically mean that disqualification proceedings will follow. The contrary is often the case.
  • The way in which that explanation is given to the Insolvency Service is the key ingredient here. That is where the NDP Team of specialists comes in. The team has a combined 100 years of experience in dealing with Director Disqualification work, both for and against the Insolvency Service.
  • Disqualification is not the inevitable consequence of a Director Disqualification investigation by the Insolvency Service. Provided a full, reasonable and coherent explanation of all relevant matters is given to the Insolvency Service, then our experience is that they can and will abandon Director Disqualification investigations.
  • A Director should use the time before the commencement of Court proceedings by the Insolvency Service as their window of opportunity to tell them the full details of the case and its context in order to maximise the chance of explaining away the concerns of the Insolvency Service.

Talk to us if facing a Director Disqualification investigation

If you are a Director facing the prospect of disqualification proceedings, then please contact us, call us on 0121 200 7040 or email us on law@ndandp.co.uk.

The initial discussion is FREE, and the sooner you talk to us, the more we can likely do to help.