You can be disqualified from being a company director if you do not meet your legal responsibilities and are unfit to be a director. Have you received a letter from the Insolvency Service, or a law firm representing them, requesting information from you and/ or threatening to disqualify you as a director? If so, our Director Disqualification Solicitors can assist. Please contact us as soon as possible so that we have the best opportunity to assist you.
Took the time to listen to my specific case and were honest enough to give their opinion on the potential outcome(s).
The Insolvency Service may investigate you personally in your capacity as a director, or alternatively your company, if you are involved in insolvency proceedings or if there’s been a complaint. If the Insolvency Service believe you have not complied with director duties, they will correspond with you in writing specifying:
They may also request additional information from you to aid their investigation.
Where possible and appropriate you should consider assisting the Insolvency Service with their request for information. If you receive such a letter, you should contact our Director Disqualification Lawyers as soon as possible, since we can provide guidance on what information you should locate and disclose. It might also be appropriate to explain any information that you disclose, to enable them to understand the nature of the disclosure and help them to interpret it. What you do not want is a situation where they misinterpret any of your disclosures to your detriment.
It is also important to respond to any reasons why they think you are unfit to be a director and why they are initiating the disqualification process. Unfit conduct for the purpose of any investigation includes:
We recommend that you contact our Director Disqualification Lawyers before you respond to the Insolvency Service. If you respond before we have had an opportunity to assist, then there is a risk that you might compromise your position; in such circumstances it may be more difficult for us to help.
It is important to provide as much information and documentary evidence to challenge the Insolvency Service’s reasoning. It might also be appropriate to obtain expert evidence to support your position. Expert evidence might include accounting or tax evidence. This would be obtained and disclosed in circumstances where such evidence can be used to challenge any conclusions reached by the Insolvency Service or their advisers.
If you want to obtain expert evidence, then you should obtain a copy of the CV of the proposed expert and ask them to provide evidence that they have experience of acting as an expert in accordance with the Civil Procedure Rules – Part 35. You should also ensure that the expert has suitable qualifications – in relation to an accountant this could include being a qualified chartered accountant. The expert’s qualifications and experience will be an important factor in obtaining a credible expert report. We can instruct and expert on your behalf if you wish. One point to remember, you should obtain a fee quote from the expert before you instruct them, so that you do not have any surprises!
In our experience the Insolvency Service are pursuing director disqualification in circumstances where company directors have either: (i) provided false and misleading information/ declarations on completed BBL application forms; and/ or (ii) failed to use the BBL in accordance with its terms.
Many BBL application forms required a director to confirm: (i) the annual turnover of the company in the previous calendar year; and (ii) whether the company was insolvent at the time of application. If there is evidence to show that either of these declarations were incorrect, then the Insolvency Service may consider pursuing the director for disqualification.
Bounce Back Loans were granted on condition that they were not to be used for personal purposes but would be used for the economic benefit to the business. The Insolvency Service may consider pursuing disqualification in circumstances where it was used for personal purposes.
It seems to be standard practice for the Insolvency Service to send directors a questionnaire, which includes questions about the BBL application form and the use of the loan. In some cases, the questionnaires refer to existing evidence that has been obtained by them. We recommend that before you respond to the questionnaire, you consult one of our director disqualification lawyers. If you respond before taking advice, then, depending on your answers, it may make it more difficult for your lawyers to enable a successful outcome for you.
What are the grounds upon which a person may be disqualified as a director?
The grounds upon which a court may disqualify a director are included in the Company Directors Disqualification Act 1986 and include disqualification for general misconduct in relation to companies and unfitness. We are presently experiencing an increase in instructions relating to investigations by the Insolvency Service, or lawyers instructed by them, into bounce back loan (BBL) and coronavirus business interruption loan (CBIL) applications and misuse of the loans. The general procedure is to send questionnaires to the directors of the companies in question. The purpose is to assess whether there are any grounds to recommend director disqualification, because of fraudulent loan applications or misuse of the loan proceeds. We recommend that you take legal advice before completing the questionnaires.
How long does director disqualification take?
Director disqualification can last up to 15 years. During this period, you cannot be a director of any company registered in the UK, or be involved in forming, marketing or running a company. If you believe that there is a significant risk that you could be disqualified, then you can try and negotiate a ‘disqualification undertaking’ with the Insolvency Service. This means you voluntarily disqualify yourself for a period agreed with the Insolvency Service, which will end the threat of disqualification court action against you.
