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A director threatened with disqualification proceedings may find that his/her current and future business plans and opportunities severely curtailed.
We address some of these considerations below.
New and current companies
A common problem which occurs with disqualification proceedings is that, by the date proceedings are commenced and / or brought to trial, up to 4 years may have passed since the original company went in to insolvency. During that period, the individual concerned has quite often dusted themselves down and started a new company (which may well be very successful) or got involved at management level in another business.
Suddenly finding this all under threat can be extremely concerning.
- even if a director has successfully obtained court permission to carry on as a director despite disqualification – it is still a matter of public record;
- many companies (particularly those involved in the financial sector) or for those reliant on funding, the very existence of one of the directors on a public register of disqualified directors may cause difficulties for this new company.
It is not unusual nowadays for credit reference agencies and financiers to rely on additional sources of information when reviewing a company report and it is becoming increasingly common for such company reports to include a comment or cross reference to whether the director is disqualified.
In such circumstances, the legal remedies available (including the option to seek leave) will not be sufficient to deal with these risks to the new company.
This is obviously subject to the risk that a compensation order is not sought.
- however, we increasingly find that such individuals may some years later (whilst the disqualification period is still ongoing) come across an opportunity which requires them to act as a director or in the management of a limited company;
- it is only when this occurs that the schedule of misconduct annexed to a disqualification undertaking comes under closer scrutiny;
- if the director wishes to seek court permission to act at this much later stage then this schedule (annexed to the disqualification undertaking previously provided) will be the main source of information for the court to refer to when considering whether to grant such permission / leave;
- equally – if the period of disqualification was not negotiated downwards in the voluntary undertaking – this can completely prohibit any later applications for permission to act as a director.
It is always sensible to take legal advice as early as possible in disqualification claims. Part of the assessment of any claim should always be future business opportunities and how an order might impact on this – however remote they may seem at the time.
At Francis Wilks & Jones we can advise on how disqualification will affect you and the risks you face when accepting a disqualification undertaking. Please call any member of our Director Services Team for your consultation now.