When it comes to being disqualified from being a company director, there are a number of activities that can lead to you being disqualified. The basic requirement is failing to meet the legal responsibilities that are expected from a director or being declared as being unfit for duty or engaging in unfit conduct.
There are many different types of behaviour that fit under the term unfit conduct, including:
Allowing a Company to maintainTrading when it is unable to Pay its Debts
This is a fairly simple and straightforward example of the sort of action a director could take to be deemed as being unfit for the role. This is deemed as “trading while insolvent” and it is deemed as being an extremely serious misdemeanour. If you know that your business is no longer able to meet its bills and make payments, it is against the law to continue trading as normal. This is one area that is regularly investigated after a firm has gone bust and it is something that has led to many directors being stripped of their ability to act in this role.
Not maintaining proper accountancy Records
This is a basic requirement for businesses and it is detailed in a wide range of regulations and rules governing businesses. While some directors or firms may try to plead ignorance or uncertainty over what exactly they need to report, there is no way a director can claim that they didn’t know that their firm had to maintain and submit proper accountancy records.
There are many reasons why a firm may wish to hide or not disclose some elements of their business but failing to maintain proper accounting records is a sure-fire way to put your business and yourself at risk for any director.
Not Paying Tax that is Owed by the Firm
Again, this is a simple and straightforward issue, yet it is one that many directors and businesses fall foul of. While most people would prefer to pay less tax, or no tax at all, there is a requirement for businesses to make these payments. A business that fails to make these payments or is found to be deliberately withholding payments to HMRC, perhaps to ensure that they can continue to trade, are committing a major offence. The offence is serious enough that it can cost a director their right to act in that position.
Using company Assets or Business for Personal Gain
Even by using common sense, this is an activity that shouldn’t be allowed, and it is serious enough to cause a director to be disqualified from holding a position. When this sort of activity is aligned to a firm going bust, it is greatly frowned upon. Any director that is found to have acted in this manner can expect to be severely punished for their actions.
With respect to the disqualification process and how it works, it may be that the Insolvency Service will decide to investigate you as a director, or the company, if it has received a complaint or if there is an involvement in insolvency proceedings. If they have reason to believe that a director has failed in their legal duties and responsibilities, they will communicate with the director in writing.
This communication is likely to include their findings which should detail why they think that you are not fit to be a company director. The communication should also state whether they plan to initiate the disqualification process against you. This will provide you with the opportunity to respond and it is imperative that you do decide to respond to this form of communication.
You may choose to wait to see if the Insolvency Service will take you to court, which will provide you with the opportunity to present a defence against the case. If you agree with the findings, you may decide to provide the Insolvency Service with a “disqualification undertaking”, which will you being voluntarily disqualified from the role of director and this will ensure that no court action is brought against you. This is often a decision that people take based on the financial risk against them, but it is essential to obtain proper legal advice. This has hopefully provided you with an outline of how you can be disqualified from being a company director, and how you should respond to any case brought against you.
Andrew Reilly is a freelance writer with a focus on news stories and consumer interest articles. He has been writing professionally for 9 years but has been writing for as long as he can care to remember. When Andrew isn’t sat behind a laptop or researching a story, he will be found watching a gig or a game of football.