Director disqualification is a serious matter that can have a significant impact on a director's ability to work in the future. If you are facing a disqualification investigation, it is important to understand the process and your rights. In this article, our director disqualification solicitors will provide a brief overview of the disqualification process, including what to expect if you are contacted by the Insolvency Service.
What is director’s disqualification?
A director of a limited company that went into insolvent liquidation or administration might be targeted by the Insolvency Service for disqualification if misconduct is found against that director.
What happens if I am subject to an investigation by the Insolvency Service?
Often the first you will know that you may be being investigated is that you will receive a Questionnaire to complete by the Insolvency Service. This will ask certain general questions about what happened in the company. It may also ask more targeted questions about matters that they are particularly concerned with. For example, asking for details of what certain monies removed from the company were used for.
At the time of sending the Questionnaire to you, a decision has not yet been made to bring proceedings against you. This is therefore your opportunity to clear up any misunderstandings, and ensure all relevant information is made available to the Insolvency Service. If you ignore this Questionnaire, the Insolvency Service will rely only on what they have by way of information so far, which may not provide the full picture.
Your response to the Questionnaire may open up a helpful dialogue, and might lead to the Insolvency Service deciding not to proceed any further.
You will be given a certain time frame to answer questions, but this can be flexible. As long as you cooperate and don’t ignore requests, the Insolvency Service are quite forbearing.
The decision stage
If the Insolvency Service are not satisfied that you have answered all of their queries fully, or they don’t believe you have addressed issues of concern, they may make the decision to proceed with a claim against you.
At this point they will notify you of their decision, and what period of disqualification they consider is appropriate. They will offer you the chance to accept a disqualification without issuing a claim against you. This is called a Disqualification Undertaking.
If you have no defence to the claim made against you, then it may be worth you considering this option. Often the Insolvency Service will give you a slightly reduced period in return for early cooperation, and you won’t incur the legal costs of defending the claim – either your own or the Insolvency Service’s. Once proceedings are issued, they will inevitably claim their costs from you, even if you settle the claim before it goes to trial.
The claim is issued in court
If you don’t agree an undertaking and haven’t persuaded them not to bring a claim against you, the insolvency Service will issue a claim against you in court. This will include all of the evidence they have against you so far to justify their decision to proceed. This will usually be at the court closest to the registered office of the company in the last 12 months before insolvency.
If you ignore the claim, then at either the first or the second hearing, the Insolvency Service will ask the court to make the disqualification order against you. They will seek costs against you for their costs so far.
If you wish to defend the claim
You have the opportunity to fully defend your claim, and put forward your own evidence in response to the evidence against you. If you wish to do this, you should contact a insolvency solicitor as soon as possible, to ensure you are given sufficient time in which to do this.
The Insolvency Service keep matters under review even after issuing a claim against you, so if you can provide evidence even at a late stage that will provide a defence, they are likely to withdraw the claim against you. They may however still ask for their costs of the proceedings to date.
Alternatively, you are entitled for the matter to go to a full trial, which will be heard by a specialist insolvency judge.
What should you do if you are facing a disqualification investigation?
Director disqualification claims can be very worrying for a director, as they can seriously impact on your ability to make a living. It is vital that you don’t ignore any correspondence or court papers from the Insolvency Service, as this will inevitably lead to an order being made against you in your absence even if you have a good defence to the claim. Engaging with the Insolvency Service as soon as you hear from them may lead to their not proceeding against you, or at the least it might allow for a reduced disqualification period and reduced costs to you.
At Harper James our director disqualification solicitors have many years’ experience advising directors who are targeted for disqualification by the insolvency service. difficulties. If you have received any communication from the Insolvency Service, don’t delay. Contact one of our director disqualification solicitors today to discuss your options. The earlier you speak to a professional adviser, the more options remain open to you to avoid disqualification or reduce the period you may be disqualified for.