What role do the Insolvency Service have in directors disqualifications?

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How does disqualification work and what is the Insolvency Service’s role?


1. The Administrator or Liquidator completes a D Return or D Report on the conduct or misconduct of directors.


The directors of any company which enters into Administration or Insolvent Liquidation will be the subject of a D Return or a D Report submitted to The Insolvency Service by the Administrator or Liquidator. A D Return will confirm that there is no evidence of misconduct.
During formal insolvency proceedings, an Administrator or Liquidator will send a D Report to the Secretary of State detailing the misconduct of all directors who were in office during the last 3 years of the company’s trading.


Top tip: A D Report or D Return will be completed on all directors who held office within last 3 years even if they resigned before the date of Insolvency.


2. The Insolvency Service then carries out an investigation of your company and your conduct.


The Insolvency Service (acting on behalf of the Secretary of State) will decide whether it is in the public interest to begin investigations into the actions of individual directors and the company.
If you have received a letter from the Insolvency Service you may have seen a threat of disqualification when you received a formal questionnaire to complete seeking answers to questions on your failed company and your conduct as a director.


Top tip: It is important to respond carefully and properly as the response will determine the decision whether to pursue disqualification and your responses may be produced in evidence.


3. Notice or Pre-action Letter (referred to as a section 16 letter)


If The Insolvency Service considers it to be in the Public Interest that a director be disqualified because it thinks you haven’t followed your legal responsibilities as a director, they will send you a notice in writing of their intention to commence proceedings to disqualify you.
The notice will set out the grounds on which disqualification is to be pursued and we can advise and draft a response to the allegations made against you. The notice will set out:


1. what they think you’ve done that makes you unfit to be a director,
2. if they intend to start the disqualification process,
3. how you can respond.


Top tip: We recommend you seek legal advice at this point. In our experience, directors who choose to respond to The Insolvency Service themselves, without having considered legal advice, can often have a detrimental effect on their case.


You then have two options available:


A) wait for The Insolvency Service to take you to court to disqualify you – obviously you can defend the case in court if you disagree with their findings.
B) give The Insolvency Service a ‘disqualification undertaking’ - this means you voluntarily disqualify yourself and ends this action against you.

It is worthwhile considering the second option if you have admitted that you have acted wrongly, which means that you are likely to receive lower penalty on the period of disqualification and complete the process much more quickly by lowering the set period of time.

Top tip: If you choose to give a disqualification undertaking before the court proceedings are issued you will receive a discount on the period of disqualification and The Insolvency Service will not seek to recover their legal costs from the director.

Top tip: It is advisable to seek expert assistance in negotiating the period and terms of the Undertaking as they need to be carefully scrutinised and agreed by the director so that those terms do not leave the director open to other civil or criminal action.

If you want to speak to a member of our team for a confidential discussion on concerns you may have relating to directors disqualifications please either complete our contact us form or call us directly on 01908 414990.

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