I’m A Director Facing Disqualification What Should I do ?
Here at Pavidus we specialise in appointing and selecting the expert legal advisors with experience in your field to help and advise Directors in relation to Director Disqualification Investigations (‘DDI’) and Director Disqualification Proceedings (‘DDP’) brought against you. We work hard to minimise and eliminate the anxiety you will be facing as well as alining you with the ultimate legal team to mitigate your current situation.
I’m a Director facing a DDI or DDP what should a I do ?
If you are facing a DDI or DDP and are in need of help and advice then we can help you. The Insolvency Service abandon cases when convinced there is no case to answer
Our recommend legal experts understand exactly how to achieve that. We are able to connect you to a legal expert in your particular field who can act with haste to mitigate your situation.
I’m A Director Accused Of Unfit Conduct
Crown Debt
The Insolvency Service believes there is significant public interest in chasing Crown Debt cases involving directors.
Pavidus nominate and recommend legal experts who monitor carefully the reasons relied upon by the Insolvency Service to seek Director Disqualification, on a case-by-case basis. Crown Debt cases (HMRC is owed money at liquidation) figure prominently this is the most common reason relied upon for allegations of unfit conduct by the Insolvency Service when seeking to disqualify a director. It is often an allegation against the Director of ‘trading to the detriment of the Crown’ or ‘improper retention and use of Crown money’.
The Insolvency Service is intent in pursuing cases where there is significant Crown Debt at liquidation. There are a number of actions a director can take before and after liquidation, to deal with allegations of unfit conduct
Common allegations of Unfit Conduct the Insolvency Service regularly investigate
Accused Of Bounce Back Fraud ?
Improper Bounce Back Loan (‘BBL’) applications and/or misuse of such funds. Accused of bounce back fraud ?
This is a political hot topic, with every liquidation featuring a Bounce back loan being subjected to a potential fraud investigation. Director Disqualification is however tricky in such cases.
Such investigations often also result in Director Disqualification leading to director disqualification compensation claims against said director
The Government has created the Taxpayer Protection Taskforce focusing on investigations of Covid fraud and the suspected £4.9 billion of fraudulent Bounce back loans, furlough fraud and PPE fraud.
Failing to maintain and/or preserve and/or deliver up adequate books and records of the company to its Liquidator.
This Unfit Conduct allegation also includes Criminal Law conduct, and you could be facing a sentence of imprisonment. You need to tread carefully in dealing with this allegation so it is important to have the right support
The High Court confirmed such an allegation will be made if the Director provides no reasonable explanation as to why records delivered to the Liquidator or Insolvency Service have not included or did not include all the accounts and records that the company should have kept
Even a single allegation of failure to maintain or deliver accounting records and a failure to keep books for a small period of time is enough for a finding of ‘Unfit Conduct’ to be made against a Director, particularly if it impedes a Liquidator from ascertaining the true state of company affairs.
Preference payments to connected creditors.
Allegations of Unfit Conduct attract Criminal consequences (to include imprisonment). Caution needs to be taken in dealing and responding to such allegations
Excessive remuneration and undue benefits.
The question here is whether the Director package was out of proportion to the company’s financial health.
Improper use of customer deposits.
This remains a ‘red flag’ offence for the Insolvency Service to pursue.
Failure to exercise proper control over the affairs of the company.
This allegation of ‘Unfit Conduct’ is one we are seeing more commonly.
Dishonesty/fraud/serious want or probity.
This type of allegation will always attract the investigations of the Insolvency Service.
Summary
The aim must always be to persuade the Insolvency Service that it is ‘not in the public interest to carry on with a DDI or DDP. If this is properly demonstrated the Insolvency Service will abandon DDI . Contact Pavidus Legal without haste and we can nominate the Legals to guide you through the storm. We will do the leg work and locate the expert you require in your field in order to get the best outcome achievable in your individual situation with a myriad of experts to our black book Pavidus legal are able to take the stress out of the challenges you are currently facing
Parallel investigations by the Liquidator of the failed company.
The Insolvency service are investigating me, what should I do ?
It is common to see a DDI carried on by the Insolvency Service in parallel with an investigation into the Director’s conduct by the company Liquidator. The following points are crucially important here:
The DDI will have commenced, based on a mandatory report from the Liquidator to the Insolvency Service on the conduct of all Directors (current and recent past). It should not thus come as any surprise, to discover that the company’s Liquidator may also be pursuing and investigating conduct issues in relation to the Director. At Pavidus, we are well used to searching for your Lawyers with a wealth of experience in representing Directors faced with parallel recovery action from Liquidators.
The Liquidator and the Insolvency Service may well be investigating the same factual Director conduct issues, but the remedies they seek against the Director are very different. The Insolvency Service acts in the Public Interest to take delinquent Directors out of the system by seeking their disqualification. The end game of the Liquidator on the other hand, is to seek a financial recovery from the Director personally, alleging (for example) Misfeasance by the director (i.e. misapplication of company money or property) or breach of Statutory Duty by the Director.
Both investigations need to be considered together, to ensure consistency of response by the Director and, where possible, parallel outcomes. Persuading the Insolvency Service to abandon a DDI can be especially important in such cases.
Often, the Director may not even initially know at the outset of the Liquidator’s parallel investigation. Care needs to be taken by the Director to ensure he/she is alive to and takes such matters into account, from the beginning.
4. Directors always have options. Which option to follow will be apparent once a full review of the case has taken place with the Director.
What options do I have when facing director disqualification ?
Section 16 Letter
The Director will always receive a Letter Before Action if Director Disqualification is contemplated (the Section 16 Letter) inviting the Director to meet the Insolvency Service or make written representations, as to why the Director should not be disqualified, in all the circumstances of the case. The well-advised Director will use this window of opportunity to make detailed written representations to the Insolvency Service as to why Director Disqualification is ‘not expedient in the Public Interest’. Investigating ‘the full circumstances of the case’ is vitally important. Only the Director will truly know what has gone before. He/she lived the history of the company.
Enter into a voluntary Director Disqualification Undertaking, to avoid Court proceedings. The terms of the Undertaking and the length of the disqualification period are matters for negotiations with the Insolvency Service. A lower period of disqualification can be the difference between obtaining (or not obtaining) Permission to Act in the future (see below), despite disqualification.
Defend the claim. If this route is followed, then that means the Insolvency Service has rejected the Director’s written representations (as to why the Director should not be disqualified). Directors who choose to defend Court proceedings must do so ‘with eyes wide open’ as to costs and wider risks consequences of litigating. The Insolvency Service do get it wrong. The Insolvency Services does continuously review its decision to pursue cases through the Courts and where (for example) the Director puts forward new/further evidence, it does in appropriate cases abandon its Court claim.
Apply to the Court for Permission to Act
How do I apply to continue to act as a director when facing disqualification ?
I’m facing director disqualification but have other companies
Permission application by Director. Notwithstanding Director Disqualification, if a ban is imposed/agreed to for 7 years or less (as a rough rule of thumb), then application to continue as a Director of another company can be given by the Court, albeit subject to conditions (it is more difficult to obtain Permission, as the period of Director Disqualification increases).
Meet with the insolvency service
What happens when I meet with the Insolvency Service ? What should I expect when I meet with the Insolvency Service ?
Such face-to-face meetings with the Insolvency Service can be beneficial, in allowing the Insolvency Service to get a better appreciation of the Director and his or her history of events.
It is important that the Director uses that meeting to his/her very best advantage. That inevitably means taking an experienced Solicitor to such meetings. We at Pavidus legal are well placed to recommend solicitors experienced in dealing with such meetings
5. Compensation Orders
The court has made a compensation order against me ,what are my options ?
The Court can make a Compensation Order where:
The Director is subject a Disqualification Order or Disqualification Undertaking;
and
The conduct for which the Director is subject to the Order or Undertaking, has caused loss to one or more creditors of an insolvent company of which the Director was a Director.
Such compensation applications need to be carefully considered on a case-by-case basis. They can only, however, bite once a director is subject to a disqualification ban.
Summary for when facing Director Disqualification . What should I expect if disqualified as a director
What happens if I am disqualified as a director ?
Take specialist legal advice early, in response to a DDI letter from the Insolvency Service or its Solicitors. .
Be comfortable with the proposed legal advisors, before engaging with them. People deal with people. for that very reason. A discussion with you appointed lawyer after consideration of the DDI letter or DDP the Director has received, will inevitably help.
The Director should learn and understand his/her options, so that informed decisions can be made.
Documents that can help me when facing director disqualification…
Assimilate all relevant documents at the earliest point. This is vitally important. Depending on the allegation of Unfit Conduct made, that will include email traffic (for example with Accountants, creditors, Lawyers, HMRC, co-Directors) and may include obtaining Witness Statements from third parties, to support the position of the Director. The written representations to the Insolvency Service are always most persuasive when supported by documents and/or Witness Statements.
Get in touch with us today for a free no obligation/no pressure initial chat on or why not email a copy of a letter you may have received from the Insolvency Service to
info@pavidus.Co.uk
