HomeFWJ TakeawayDirector disqualification claimsDealing with early Insolvency Service enquiriesOptions & making representations – section 16 letter

A section 16 letter is formal notification that formal disqualification proceedings are likely. It is vital to tread carefully and avoid mistakes which can have long lasting implications. Our team has dealt with 100's of these situations since 2002. We can advise on your options moving forward, from giving an undertaking to defending the claim and everything in between. Call our experts today.

I was delighted by the work done by the team at FWJ and cannot recommend them highly enough. Their legal and tactical knowledge was spot on. I can now continue to grow my business free from the worry of my original disqualification

A director we defended against a disqualification claim

The Insolvency Service, under authority granted by the Secretary of State for Business Energy and Industrial Strategy, has a legal obligation (where director disqualification proceedings are intended to be commenced) to send a final letter before action pursuant to Section 16 of the Company Directors Disqualification Act 1986.

This is commonly known as a Section 16 Letter.

  • you may have been in correspondence with the Insolvency Service before receipt of the Section 16 Letter and this may even have been some time ago (and thus the section 16 letter may come as a surprise); or
  • alternatively, you may have very recent correspondence exchanged with the Insolvency Service and be expecting notice of such disqualification proceedings.

Regardless of which position you are in, the section 16 letter should not be ignored.

Contents of section 16 letter

The Section 16 Letter sets out the intention to issue disqualification proceedings but also provide an alternate option to provide a voluntary disqualification undertaking. The advantage of an undertaking is that you are able to avoid liability for the legal costs of an issue disqualification claim, although there are other consequences which have become severe following recent legal change.

The Section 16 letter will also set out the allegations which will form the content of the proposed disqualification claim.

Responding to section 16 letter

Upon receipt of the section 16 letter, a director has a number of available options open to him/her as follows:

1. Do nothing

This is likely one of the most commonly adopted options, yet will almost certainly be the most harmful to you.

  • if no response is provided to the Section 16 Letter, then the Secretary of State will proceed to issue the disqualification claim; and
  • if it continues not to be challenged in legal proceedings, a disqualification order will be made almost immediately for the full disqualification period sought together with an order that the director pay all of the Secretary of State’s legal costs, which will usually be very high.

Quite often directors may seek to defend disqualification proceedings in person. However, from experience, we know that the lack of familiarity with legal proceedings often provides a considerable disability and may even lead to the same result but with much greater legal costs arising from the delays and issues caused by the director’s efforts.

2. Seek Advice

The second option is to, if it has not already been done, seek legal advice in respect of what the section 16 letter means and the risks you face and whether there are any grounds to defend the claim. This is certainly sensible – and our expert team with decades’ experience is here to help

3. Agree a disqualification undertaking

The third, and perhaps most commonly adopted, option upon receipt of a Section 16 Letter is to accept the proposed voluntary disqualification undertaking – which is a voluntary form of disqualification. But again, advice is always recommended before accepting these – you could find yourself on the wrong end of a personal compensation order costing thousands. You might agree an undertaking for too long a period which can have a massive effect on your future career.

We discuss disqualification undertakings in more detail here. But do call us first if you are considering accepting an undertaking.

4. Make Representations

Whether you have previously engaged with the Secretary of State or whether you have not, upon seeking legal advice, and dependant on that advice, it may be advisable to respond to the Section 16 Letter, making representations and setting out why you should not be disqualified.

This is effectively a mini-trial of the disqualification claim and your representations may comprise evidence not previously considered by the Secretary of State or legal arguments which may persuade the Secretary of State (or their solicitors) that the disqualification claim is not strong or may fail in defended proceedings.

  • this approach is endorsed by all sides in an effort to reduce weak cases from being issued at court;
  • we have a comprehensive experience of clarifying matters (which a director may otherwise not be capable of doing) and persuading the Insolvency Service that it is not in the public interest to pursue disqualification proceedings against you.

Whilst this approach is not always successful, as it depends on your individual circumstances, it also assists to demonstrate to the court that you have sought to avoid formal disqualification proceedings and this may benefit you later in litigated proceedings.

At Francis Wilks & Jones we are able to advise on the contents of a section 16 letter and advice or assist in making representations to the Insolvency Service, where appropriate. Call our friendly team of experts today.

I would strongly recommend using FWJ for director disqualification matters. Tactically and commercially they played it just right and I am now able to get on with my business life without the worry of disqualification hanging over me

A director we defended in disqualification proceedings

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