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    Director Disqualification

    Wake-up Calls for Directors – Some Recent High-Profile Cases

    Director Disqualification of up to 15 years for not Fulfilling their Duties

    Following the collapse into insolvency of high profile businesses such as BHS and Carillion, there has been some very public criticism of individual directors for the way they operated and managed the businesses.  The press has carried extensive coverage of BHS and Carillion Directors being called to give evidence and account for their actions in front of various select committees. This can result in serious action against the directors concerned.  Indeed, the Insolvency Service has recently announced its intention to seek the maximum director disqualification order (15 years) against former BHS Director Dominic Chappel.

    It has brought into sharp focus the fact that Directors can be held accountable for the manner in which they operate businesses and the decisions they made whilst at the helm.

    Directors are getting worried about their responsibilities

    At Poppleton & Appleby, we have recently seen an increase in enquiries from the owners of SME businesses who are now alert to this issue (and the possible outcome of director disqualification) and have sought our advice on continuing to steer their own companies though some pretty choppy economic waters.   

    There is a growing awareness amongst SME owners of the concept of “wrongful trading” and the personal exposure for decisions made when they continue to trade a company which is clearly insolvent. There is a very fine line between the commercial optimism that a business owner is entitled to in believing things will get better and the clear and present indicators that there is a problem requiring swift action.

    We have had to deal with some misconceptions and unfounded fears, particularly the role to be played by Insolvency Practitioners who deal with eventual corporate failures. In particular, we are not there to punish Directors who act reasonably and in good faith, but we do have a duty to identify and deal with those who have acted irresponsibly and to the detriment of creditors. This is a statutory requirement of the Insolvency Act, 1986.

    Business Insolvency Advice to Help Avoid Director Disqualification – Free Help Sheet Available

    For the most part, we are able to assure Directors that acting with caution and responsibility is the general standard expected and to avoid maverick decisions or simply “burying one’s head in the sand” if there is a serious threat to the viability of a business. Indeed, our focus is just as much on the business insolvency advice required to turn around the fortunes of a business, as it is to deal with insolvency if it happens.

    We have produced a brief free help sheet to clarify some of these points and to set out some of the general common-sense steps Directors of SME’s should take in the day to day running of their business.

    If you would like a copy of the help sheet to pass on to your clients, please contact us or call us on 0121 200 2962.

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