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Dealing with an Insolvency Questionnaire either from the solicitors acting for the Insolvency Service (‘IS’) or from the liquidator.

You the director have received the questionnaire. It is a potential ‘bear trap’. A Director Disqualification investigation might be the outcome. What to do?

Mandeep Nagra, one of our Senior Director Disqualification Solicitors at NDP was contacted by the Director who had received correspondence from Solicitors acting on behalf of the IS, requiring the completion of a detailed Insolvency Questionnaire regarding the affairs of the insolvent company, its fall into insolvency and the Director’s role in it. These questionnaires are detailed and very specific. Their purpose is for the IS and or the Liquidators to decide if the directors involved have carried out their duties correctly or if there are grounds for a Director Disqualification investigation, a financial recovery claim or even a Criminal Law investigation. For these reasons, it is vital to complete these questionnaires carefully, fully, accurately and honestly, and to take professional advice to do so.

Director Disqualification
Mandeep Nagra

This case study details the steps Mandeep took on behalf of our client to ensure the Insolvency Questionnaire he had received was completed in such a fashion and submitted to the IS with all necessary supporting documents. The outcome was that the IS dropped the case and no longer proposed to take director disqualification action against our client.

Questionnaire from the Liquidator

It is likely that the Director will also receive a similar Questionnaire for completion from the Liquidator.  It is important that answers given by the Director are consistent.

The IS Questionnaire contained 80 questions to be completed by the Director, covering in particular the following areas:

  1. The Director’s role within the company;
  2. The role of the Co-Director;
  3. The trading history of the company;
  4. The nature of and reasons for the various payments made to the Director, other Directors of the company and third parties;
  5. The use of a Bounce Bank Loan (‘BBL’) obtained by the company and whether it had been correctly applied for;
  6. The date when the company became insolvent (i.e. at what point did the company become insolvent at a point before cessation of trade) and when the Directors were first aware of the company’s financial difficulties;
  7. To confirm details of the accounting records of the company.
  8. What (if any) steps the Director(s) took when the potential for formal insolvency became a realistic outcome.

Do I need to complete the questionnaire?

It is important for the Director to answer the set of questions very carefully, as:

  1. The answers given will inevitably be carefully considered by the IS and/or the Liquidator and may result in the IS bringing Director Disqualification proceedings (or even a Criminal Law investigation) against the Director.
  2. The answers given might lead to financial recovery action by the Liquidator against the Director (yes, the IS and Liquidators do share information).
  3. Failure to answer might be treated by the IS or the Liquidator as Director misconduct and result in enforcement procedures or be a catalyst for the commencement of Director Disqualification proceedings or Misfeasance/Breach of Duty proceedings against the Director.

What to do? Talk to our Director Disqualification Solicitors

On these facts, before completing the Questionnaire, Mandeep requested from the IS Solicitors all the evidence that they held in respect of the Director, to include all previous correspondence with him.

It was vitally important for Mandeep to review all of this information, in order to correct (as needed) and contextualise any previous statements made by the Director, that might otherwise have a serious impact on the Director’s position moving forwards.

Once all the evidence was reviewed, Mandeep and NDP Director Sukhbir Mall met the Director, to help him carefully complete the Questionnaire.

The key – support the questionnaire with a detailed accompanying letter

The Questionnaire itself is inevitably a blunt instrument.  It allows only for short responses (often inadequate) and is a document full of bear traps for the Director.  Our experience and practice is that it is always best to support the Questionnaire with an accompanying letter that addresses in detail areas of key concern (that we will identify with the Director on a case-by-case basis) and then support that position with documents, where possible.

The Outcome – The Director Disqualification process was dropped

Following submission of the completed Questionnaire, the IS Solicitors confirmed that the investigation into the Director’s conduct was complete and based on the available information, the Secretary of State did not propose to take director disqualification proceedings against the our client.

The Director was delighted with the outcome

“The team at NDP understood my situation which meant I felt supported and well advised through this worrying time.  They demonstrated a deep understanding of Insolvency Law, and they proved a valuable Counsel, resulting in the Director Disqualification enquiry being closed without any further action against me.  A great relief and a satisfactory outcome to this episode.  Thank you, Sukhbir and Mandeep.”

Lessons to be learned

It is important when you receive a letter or Questionnaire from the IS or from their Solicitors, in relation to directorial conduct, to make sure that this is completed properly and with all the relevant evidence in hand.  Time and legal fees spent now may avoid a much bigger problem – from a director disqualification investigation up to criminal proceedings – and much bigger legal costs further down the line.

If you are a Director facing an investigation by the IS then please get in contact with our experienced team of Director Disqualification Solicitors on 0121 200 7040 or by email to law@ndandp.co.uk.