Company directors can be disqualified from holding their position, and subsequently barred from holding the same position, starting, running or promoting a company for a prescribed period in some circumstances. Director disqualification is used to remove unfit directors from their position of influence after failing to meet their legal responsibilities.
Read on below to find out more about director disqualification.
Reasons For Disqualification
As previously mentioned, a director may be disqualified from their position after failing to meet their legal responsibilities. Failure to maintain proper accounts, pay taxes and file returns with the necessary authorities are some of the main reasons for disqualification. Other grounds for disqualification of directors include using company resources for personal gain as well as allowing the company to continue with trading when it cannot manage to service its debts.
Where any of the above grounds materialize, anyone can request for the director involved to be disqualified.
Who Can Conduct Director Disqualification
Where there are insolvency proceedings against a company, the Insolvency Service usually investigates the company plus its directors. Investigations against directors may also be conducted where a formal complaint has been lodged with the Insolvency Service.
Other bodies that can have a director disqualified in some specific circumstances include the Companies House, insolvency practitioners, the Competition and Markets Authority and courts.
Once the Insolvency Service finds that a directors conduct has not met the necessary legal threshold, they will inform them of the same in writing. They usually inform the director in question of what they have discovered, whether they intend to commence disqualification proceedings, and how the director can respond.
On their part, the director can defend their conduct in a court of law, during the disqualification proceedings. Alternatively, they may respond with a disqualification undertaking. This simply means that they are willing to vacate the directors position voluntarily.
Consequences Of Disqualification
Once a director has been disqualified from their position, they are barred from holding such a position for up to 15 years. Its worth mentioning that the limit may be reduced in accordance to the severity of the issues raised.
During the disqualification period, the affected party is barred from forming, directing the operations or marketing a company in the UK. Furthermore, they cannot be appointed as director in a company in or connected to the UK; otherwise they may be sentenced to prison or breaking the law, you can find out more from https://www.ndandp.co.uk.
Once a director is served with a director disqualification proceedings notice, it is highly recommended that they seek legal assistance as soon as possible.