Over 1200 Director Disqualifications in 2018 19
How Does the Insolvency Service Instigate Director Disqualification Proceedings? What Can the Director do About it?
In 2018/19, 1,242 directors were disqualified for misconduct, following investigations by the Insolvency Service, resulting in bans of up to 15 years. In this article we look at how the Insolvency Service instigates director disqualification proceedings and look at some of the directors who have received substantial bans. The article concludes with how we, as specialist director disqualification solicitors, can help directors who are investigated by the Insolvency Service.
How Does the Insolvency Service Instigate Director Disqualification Proceedings?
There are many legal responsibilities that directors have, and these responsibilities continue until such time as a director resigns his/her post. These responsibilities are enshrined in the various Companies Acts and, essentially, are all about being a responsible director. Some of the key responsibilities are:
- Follow the Company’s rules as shown in the articles of association
- Keep accurate and timely company records
- Report any changes
- File Company Accounts and the Company Tax Return
- Pay Corporation Tax and all other taxes
- Inform shareholders if you, as a director, are likely to benefit personally from a specific transaction
If you fail to meet your responsibilities as a director, you may be fined, disqualified or even prosecuted. Failing to meet these responsibilities is most often revealed when a company is involved in insolvency proceedings or if there has been a complaint. It is at this stage that an investigation by the Insolvency Service is most likely. The process is as follows:
- If the Insolvency Service determines that the director under investigation has not followed his/her legal responsibilities that you haven’t followed your legal responsibilities, they will write to the director concerned explaining the misconduct and that they intend to instigate director disqualification proceedings.
- At this stage, the director can either contest the allegations in court, which could lead to a disqualification order, he/she can provide a voluntary disqualification undertaking, which puts an end to court action. It is at this stage that we are often retained by the director under investigation to defend him/her against the Insolvency Service’s allegations.
If you are banned as a director, or accept a director disqualification undertaking, the disqualification can be for anywhere between 2 and 15 years. This covers being banned from being a director of a limited company and even being involved in the running of a company. Director Disqualification is a serious punishment for not fulfilling your responsibilities as a director, not just financially but also reputationally.
In addition if, once disqualified, you are found to have breached your disqualification restrictions, you could receive further punishment, including a heavy fine or a custodial sentence of up to 2 years.
How Many Directors Received Substantial Disqualifications in 2018/19?
According to Insolvency Service figures, the average length of a director disqualification since April 2014, is 5.7 years. However, there are occasions, where directors receive longer bans of 11 years or more, and these are known as substantial bans. During 2018/19, the following substantial bans were handed out:
- 70 people received Section 6 disqualifications – bans for unfit conduct in relation to an insolvent company – of between 11 and 15 years.
- 77% of these substantial disqualifications were director disqualification undertakings of which the vast majority were for 11 and 12 year bans. 6 directors did receive the maximum 15-year disqualification.
- 43% of the substantial disqualifications in 2018/19 involved some form of tax misconduct, such as VAT fraud. Other examples of misconduct included dubious investment schemes and directors breaching a previous ban.
Of those individuals with substantial bans in 2018/19, a significant proportion were in their 40s (36%) or 50s (30%) but there were 2 people under the age of 30 and another 2 people over the age of 70.
London was the biggest hotspot seeing 19% of substantial bans, with the West Midlands in second place having a 10% share. 3 disqualified directors were even registered to countries outside of the United Kingdom.
Below is just a sample of some of the substantial director disqualifications that were handed down by the Insolvency Service in 2018-2019.
- Maximum ban for director involved in multimillion VAT fraud
- 14-year banfor Brazilian social housing investment boss
- Two directors banned after attempting to cheat millions in complex VAT scam
- Husband and wife team bannedafter duping businesses to sponsor unnecessary educational materials
- Courts disqualify stooge director for 12 years after she illegally transferred £2.5 million worth of property assets to her father-in-law.
Is Director Disqualification a Certainty Once the Insolvency Service Investigates?
The answer is no! Clearly receiving a letter from the Insolvency Service notifying their intention to investigate is a serious occurrence. However, at this stage it is important to note that this letter is based on what they have found out so far and at this stage the detailed investigation has not been carried out. This is where our director disqualification specialists come in.
We have defended hundreds of directors threatened with disqualification over the years. It is a detailed and complex area of law, and the outcome depends on the facts of each case. However, once instructed and given access to the accused director and the full details of the case, we aim to provide full and detailed answers to each question raised by the Insolvency Service, with a view to getting them to drop the case or securing a reduction in the length of the disqualification. Click here to see some of our testimonials from directors we successfully defended.
Our director disqualification solicitors have experience of working for the Insolvency Service, so know how they work and what they are looking for. It also means we have long experience in building up strong cases for directors threatened with disqualification. It is why our mantra is: no hole is too deep for us not to be able to make a difference.
If you are threatened with director disqualification, contact us immediately or call us on 0121 200 7040 for a FREE initial discussion of your case. The sooner we start the quicker we can make a difference..