If you have been found to have acted inappropriately in the course of your company directorship, or have failed to meet your legal responsibilities, you can be disqualified. Knowing what can lead you to being disqualified, and what it means for you if you are, is essential for any company director.
What does being disqualified mean?
Being disqualified means you are no longer allowed to be a company director, put quite simply.
You can be disqualified as a director for a number of different reasons, including:
- Continuing company trading when debt cannot be repaid
- Failure to keep accurate and up to date accounting records
- Not providing necessary returns and accounts to Companies House
- Unpaid company tax outstanding
- Personal use of company funds and assets
- Not meeting the legal responsibilities of directorship
How do you become disqualified
You will be investigated by the Insolvency Service, either personally as a director or company-wide. There will be a thorough examination of all records, documents, cash flow, inventory, and other data relating to your company. This is to establish whether there has been any wrongdoing.
This investigation can be triggered in one of two ways. The first is as a by-product of insolvency proceedings. The second is as a result of a complaint made against you. A complaint against a director can be made by anyone if they have reasonable grounds to suspect you have done wrong.
The results of the investigation will be provided to you. If the Insolvency Service finds any wrongdoing, they will inform you clearly in writing. They will state exactly what you have done, that they intend to start the disqualification process and give you a means of responding.
Here, you have two options:
- Let the Insolvency Service take you to court, where you have the opportunity to defend yourself if you think you have not done wrong
- Respond with a "disqualification undertaking", which is essentially you voluntarily disqualifying yourself to prevent the need to go to court
If you're unsure about whether you have done rightly or wrongly, this is the time to seek legal assistance to decide the best move forward.
What happens if you're disqualified?
If you're disqualified as a company director you'll be disqualified for a set period, anything up to 15 years, depending on the nature of your transgressions. During this time you can't be a company director of any UK company or any company with ties to the UK. Nor can you form, run, or market a UK company in any way.
Your data will be provided to the Companies House disqualified directors database and the Insolvency Service's register of recently disqualified directors.
There may be other restrictions, such as being unable to sit on a charity, school, or police authority board, be a pensions trustee, sit on the board of any health or social care body, or be a registered social landlord. Your exact restrictions will be made clear to you. Failure to comply can lead to fines of up to two years in prison.
Read the Government's https://www.gov.uk/government/collections/information-about-company-director-disqualification" for more detailed information and if you feel you need help please see https://ndandp.co.uk/director-disqualification/