When financial problems arise, or there is a possibility of insolvency, however remote, it is a very stressful time. You can get pulled in all directions trying to keep the business on track.
When there is a risk of insolvency the decisions of directors come under a spotlight. That is when director disqualification investigations become more likely.
The threat of director disqualification
If you are a director of a business facing insolvency you need to decide whether the company should stop trading, and if so, when. Your role changes, to include a duty to ensure that you do not make the position worse for creditors and shareholders whilst the company’s future is determined. If there is a real risk that creditors will not be paid and you allow the company to continue, you may leave yourself open to claims of wrongful trading, leading to possible director disqualification and/or personal liability.
The courts expect directors to take advice from professionals, when the business at risk of insolvency this advice should be from a licensed Insolvency Practitioner.
It can be particularly difficult if, as directors, you do not agree with each other on how to deal with the problems. We can help you to work out the best way forward.
Director disqualification – what does it mean?
If a company enters a formal insolvency such as administration or liquidation the insolvency practitioner is required to report to the Insolvency Service on the conduct of directors.
As a result of that report or other information provided by other government bodies a director disqualification investigation may be instigated by the Insolvency Service. If you are disqualified as a director, it can be for up to a maximum of 15 years, depending on the severity of the case. Whilst disqualified, a director, cannot (amongst other things) without specific permission of the court:
- Act as a company director
- Take part in the formation, management or promotion of a company or limited liability partnership, either directly or indirectly.
Director disqualification can be extremely damaging both for your reputation and your finances.
It is essential, therefore, that you are making the right decisions when facing insolvency and that these decisions are properly recorded. We can help you to understand what is expected of you and help you implement practical measures to create a framework for managing a company in difficulty.
Setting up a new company
If you are considering setting up a new company to carry on the same or a similar business it is important that you do not fall foul of the insolvency legislation. We can help you understand the rules and the implications if you get it wrong.
Dealing with creditor pressure
If you are under pressure from your creditors, we can help you resolve the problem. We’ve put together a brief guide that may help you but please get in touch if you need advice.