What is a director disqualification undertaking?

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What is a director disqualification undertaking?

This undertaking has a similar effect to a director disqualification order but it is entered into voluntarily without the need for court proceedings. The Secretary of State must be satisfied that the director is unfit to take part in the management of a company and be prepared to admit to being disqualified before accepting a disqualification undertaking.

Top tip: A breach of a disqualification order can have criminal implication including imprisonment for up to 2 years and/or fine.

Top tip: Did you know that the undertakings are registered on a central register of disqualified directors to which the public have access?

Our team can assist you if you believe you are considering entering into a Disqualification Undertaking. If you would like to have a confidential discussion with a member of our team, if you complete our contact us form, we will call you back at a time that is suitable for you or you can contact us directly on 01908 414990.

What other actions might be taken?
A director disqualification order or undertaking is only there to deal with the disqualification claim.

If there are other claims which may be bought against you in respect of the liquidated company, then the liquidator will need to prove these claims in their own right. A liquidator cannot rely on the fact of a disqualification to try and bring other claims against director.

Top tip: However, it is important to be aware that the disqualification undertaking/orders are publicly advertised at Companies House and therefore in any other proceedings it can be referred to by way of evidence of misconduct.

Directors should bear in mind that admitting to breaches of duty may lead to other consequences. It is possible for other actions be taken.

1. Prosecuting authorities may bring criminal proceedings in respect of any conduct which amount to a criminal offence.
2. A Liquidator may bring actions against the director for wrongful or fraudulent trading under the Insolvency Act 1986 and other statutory claims or
3. An Official Receiver may commence proceedings against the director for a breach of fiduciary duties under the Companies Act 2006.
4. An Insolvency Practitioner may make a claim for damages if the director admitted to many breaches of duty.
5. A Liquidators/Creditors can claim for a Compensation Order for any losses sustained as result of unfit conduct of a director.

Compensation Orders
Compensation orders aim to make directors financially accountable t for the consequences of any unfit conduct.

The Insolvency Service (on behalf of the Secretary of State) can apply to the civil court to make a Compensation Order if the director is subject to a disqualification order or undertaking and its conduct has caused a quantifiable loss to one or more creditors of an insolvent company. The conduct must have occurred after 1st October 2015.

There is a limitation date for bringing Compensation Order proceedings being 2 years from the date when the director disqualification order/undertaking was made.

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