HomeFWJ takeawayTakeawayDirector disqualification claimsDealing with early Insolvency Service enquiriesNegotiating voluntary director disqualification undertakings

It is vitally important to take advice before agreeing to a voluntary undertaking. Whilst directors think it is a quick way to bring an end to a difficult and stressful situation - it can have a sting in the tail. Directors are now liable for personal compensation orders once disqualified. And agreeing to a period which is too long can hugely affect your future career options. We have been helping directors with undertakings since 2002. Let us help you too.

A voluntary disqualification undertaking is an agreement between an individual and the Secretary of State agreeing the grounds of unfitness and a period for which a person will be disqualified.

It is vitally important that anyone considering agreeing to a voluntary undertaking takes proper legal advice prior to signing it .

The downsides of signing an undertaking in haste

Understandably, individuals offered the “quick resolution” of a voluntary director disqualification undertaking often just want to put the past behind them. However a hastily agreed director disqualification undertaking can have huge effects on a former director moving forward.

Whilst it may be attractive to enter into a director disqualification undertaking to avoid the potential legal costs for which you may be liable in contested disqualification proceedings, this can be a mistake. Aside from the consequences of not properly examining the wording of the director disqualification undertaking, it can:

  • seriously affect your long term future career options;
  • lead to a claim by the Official Receiver commences proceedings against the director for a breach of his/her fiduciary duties under the Companies Act 2006, Wrongful Trading under the Insolvency Act 1986 and other statutory claims. Ultimately, the director’s decision to avoid the legal costs involved in negotiating a disqualification undertaking may ultimately lead to a more costly claim from the Official Receiver.
  • open a director up to a claim under the compensation order scheme which came in to effect in 2016 as part of the Small Business, Enterprise and Employment Act 2015. This radical change can leave former directors open to personal claims for losses sustained by all creditors in the liquidation if they sign a voluntary undertaking without proper advice.

At FWJ we can advise you on the disqualification undertaking, the steps to take to mitigate your liability whilst still avoiding the disqualification proceedings and how to balance all of the above risk.

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