10 Common Mistakes in Directors Disqualification Claims

In this handy Tips booklet we examine 10 mistakes commonly made by individuals when dealing with director disqualification claims. The aim of this booklet it to help you avoid falling in to the different types of pitfall which can often happen if you are unaware of the director disqualification process.

1. Trying to deal with the claim by yourself

Often with the best of intentions, directors will respond to enquiries from the Insolvency Service in the belief that their cooperation will help have the claim dropped against them.

What directors do not realise is that once enquiries are underway, the chances are that the Insolvency Service will carry on the claim unless cogent reasons are given to persuade them to drop the case. Often the initial enquiries seem innocuous and easy to answer. However, this is a standard approach and bluntly directors are often lulled in to a false sense of security and provide answers which are detrimental to their claim.

What is not often realised by directors is that any responses written by them without the benefit of legal advice can later be used against them as part of the evidence in a claim for their disqualification. It is very easy to say things and provide documents which you believe to be helpful but which in reality count against you. Taking early advice avoids these potential problems and can make the difference to the claim being dropped entirely without proceedings being issued.

2. Avoiding communications entirely

Avoiding all communications in the hope that the claim will “go away” is never a good idea. If the Insolvency Service has written to the director making enquiries, the fact is that you are now “on their radar”. If you fail to answer any of their letters, it is highly unlikely that they will simply drop the claim. It is better to cooperate with the Insolvency Service and seek to persuade them by detailed correspondence not to continue with a formal claim.

This would appear to conflict with our advice in the previous section. This is not the case, but rather directors should cooperate with the Insolvency service in an informed manner which is protective of their own interests, for the above reasons. This is where we can assist as we have detailed experience of the risks and personal liability that you face in these situations.

3. Feeling pressured to giving a quick response

Directors can often feel pressured to meet deadlines set out in correspondence from the Insolvency Service. They should not. The Insolvency Service is quick to “impose” deadlines in the hope of obtaining a “hurried” response which can make their task easier, is administratively more convenient and assists with their annual targets. Do not fall in to this trap. There is no legal requirement to respond by the deadlines set out in their correspondence.

Remember that any responses given by you can (and often is) exhibited to the formal affidavit of the Secretary of State if proceedings are issued. It is vital that any response is carefully considered and well thought out, even if you decide not to take legal advice.

You are entitled to ask for sufficient time to respond. Don’t feel pressured in to responding in a hurry. Hastily put together responses can (and often are) used against directors and damage the prospects of defeating a claim.

4. Responding without access to relevant company documentation

Often directors will respond to enquiries without reviewing relevant company documentation, relying mainly on their recollections of events which can be many years old.

You are entitled to request access to any relevant documentation which you believe will assist in your response. That documentation will be retained by the liquidator of the company concerned. If you need access to it, make sure you ask for it. Indeed, you are entitled to ask the liquidator for a complete inventory of all company documentation if you consider this will help identify documentation needed for your response. If you do this, make sure you inform the Insolvency Service what you are doing and that the timing of your reply will depend on access to this information.

IN ORDER TO FIND OUT MORE ABOUT THIS SUBJECT AND THE ANSWERS TO THE QUESTIONS LISTED BELOW, DOWNLOAD OUR HANDY TIPS BOOKLET HERE.

ALTERNATIVELY, CONTACT THE DISQUALIFICATION TEAM ON 020 7841 0390

5. Failing to recognise that the Insolvency Service must adhere to certain time limits

6. Failure to ask for a copy of the draft evidence

7. Failure to negotiate undertakings

8. Running a company “behind the scenes”

9. Acting in the management of a company

10. Believing you cannot be a director / involved in the management of a business if disqualified

The above are just some of the mistakes in relation to disqualification proceedings. Our specialist team at FWJ are the leading experts in the country when dealing with director disqualification claims.

CALL US NOW FOR A CONSULTATION. DON’T WAIT UNTIL IT IS TOO LATE.