Defence For Disqualified Directors Orders

You may be experiencing the Insolvency Service laying the claim that one of your directors (or yourself) is a disqualified company director.

But it must prove that the director in question is unfit to continue with his or her duties. So anyone facing the prospect of being banned from continuing with their duties for a period of time should seek specialist legal advice.

Any proceedings for disqualified company directors are initiated under the Directors Disqualification Act 1986. It was this act which introduced the concept of unfit directors and their disqualification. The process is adversarial so it is always in director’s best interests to seek advice and representation from solicitors who specialise in disqualified directors cases.

There are various reasons why people may be ruled disqualified company directors. They might have allowed the business to continue trading while it was insolvent. This will have put any creditors at a severe disadvantage. They may have persistently breached legislation covering companies, such as by failing to keep proper books and records. A director may also be disqualified if he has allowed his company to use a prohibited name. Or he might have failed to co-operate with the company administrator or liquidator. Another reason for disqualification may be the fact that the director has failed to lodge tax returns or pay taxes due.

Whatever the reasons for people facing the prospect of becoming disqualified company directors, it cannot be overemphasised that the onus of proof is on those seeking disqualification. But this does not mean that those facing an order should just sit back. They need to pro-active and that means consulting with lawyers who deal with such cases.

If there is a defence against being named as a disqualified director the solicitor will help identify this. The defence will be put in a ‘Statement of Truth’ which will be put, under oath to the court. Defence witnesses may also be called. The aim is to dispel any suggestions that the director has been negligent in his duties, or is unfit to carry on his role in the business.

Even if, following consultations with the solicitor, that there is no realistic defence, there may be a chance to shorten the term of any disqualified directors ban by pleading there were mitigating circumstances. It is very important, if need be, that this course of action is followed as the consequences for disqualified company directors are so severe.

Disqualified directors cannot continue their role with their current company or form another one. Their names will also appear on the Disqualified Company Directors Register which is available to the public.