When financial problems arise, or the prospect of insolvency, however remote, they can threaten the decisions and judgement of Company Directors which means they come under a spotlight. That is when director disqualification investigations become more likely.
The Threat of Director Disqualification
Directors facing insolvency need to decide whether the company should stop trading, and if so, when. Their duties will also change, to include a duty to preserve the status quo for the benefit of creditors and shareholders until the company’s future is determined. If there is a real risk that creditors will not be paid and Directors allow the company to continue, they may leave themselves open to claims of wrongful trading, leading to possible director disqualification and/or personal liability.
The courts place great reliance on Directors who have consulted with their accountants or solicitors, but even more so when they obtain competent, independent advice from a licensed Insolvency Practitioner.
Director Disqualification is Serious
A director disqualification investigation is normally instigated by the Insolvency Service. If a director is disqualified, 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 is extremely damaging reputationally and financially.
It is essential, therefore, that Directors are making the right decisions when facing insolvency and that these decisions are properly recorded. At Poppleton & Appleby, our team of Licensed Insolvency Practitioners and qualified Business Recovery Specialists can help Directors with common-sense measures and advice to create a framework for managing a company in difficulty.
Our advice can ensure Directors avoid criticism at a later stage and can be crucial in keeping control over the decision-making process and avoid lenders, HMRC, landlords or creditors influencing the outcome.
Contact us or call us on 0121 200 2962 for help and advice if your business is facing insolvency.
For more information about our business recovery and insolvency services please contact us.