Where a company is subject to administration, administrative receivership or insolvent liquidation it is a duty of the appointed insolvency practitioner to review the directors’ conduct and report on that conduct to the Directors Disqualification Unit (”The Unit”) in accordance with the provisions of the Company Directors’ Disqualification Act 1986 (“CDDA”) by answering a series of pre-set questions. The principle aim of the Unit is to protect the general public from those who are considered reckless and culpable.
The Unit analyse the answers to the pre-case questions using a points based system. In most cases these reports are “Clean” and confirm the director was involved in a company that has failed but there are no material matters of any concern to report. No further action will be taken unless the Unit see a string of similar failures which the director has previously been involved in.
In a limited number of cases the report is adverse, which shows elements of unfit conduct. All reports are confidential between the Insolvency Practitioner and the Unit. The Unit will review these reports and make a decision on whether or not it is in the public interest to consider disqualification. Should the Unit take a case forward they will conduct further investigations and potentially issue proceedings against the director. Normally they will try to agree with the director a period of disqualification rather than take the matter to court.
Disqualification can last between 2 and 15 years depending on the seriousness of the conduct. If you are disqualified then it means you are unable to act as a director or be involved in the promotion, management or formation of a company without permission of the court.
Should you discover the Unit consider disqualification appropriate it is likely that you will not hear about it for 18 months to 2 years from the onset of the original insolvency. By this stage you may be forgiven not recalling relevant detail of the original circumstances. Worse still, you may well be running another company and this could have serious consequences for you.
What Services can PBC Business Recovery & Insolvency Undertake?
PBC Business Recovery and Insolvency can advise directors on the following matters:
- Can the claim alleged by the Unit be defeated before it goes to court?
- Can the period of time of disqualification being sought by the Unit be reduced?
- Can you apply to court for permission to continue acting as a director where you are operating another company?