Director Disqualification Offence - the duty to keep informed and supervise

There is a duty on a director to inform himself / herself of the affairs of a company and engage with co-directors in supervising and adhering to those duties.

If a director fails to monitor, supervise or keep himself / herself informed about the company, then this lack of knowledge can be no excuse in director disqualification proceedings and any finding of unfitness. It can be evidence of a director disqualification breach.

A lack of control can be evidenced by a number of things such as:-

  1. Failing to hold board meetings;
  2. Not issuing appropriate instructions to employees;
  3. Not implementing appropriate reporting mechanisms where direct supervision is not possible.
  4. Leaving important corporate matters to external bodies – for example expecting accountants to deal with all tax matters and accounts without any degree of involvement or review by directors (which is a direct contravention of Section 173 of the Companies Act 2006).
  5. Not making adequate enquiries as to the company’s financial position by reviewing management information or checking ledgers;
  6. Not regularly monitoring adherence to statutory duties, including the requirement to deal with all PAYE/VAT and corporation tax returns, filing accounts and other returns to Companies House, adherence to anti-money laundering regulations, professional regulatory requirements and any fraudulent matters.
  7. Not ensuring that a company’s creditors are treated in an identical fashion.

It is vital that all directors take an active part in a company’s management and in the interests of all parties and ensure that they ensure all parts of the company are operating in a manner that complies with the legal framework.

Any failure to do this cannot be justified unless there are unusual circumstances, for example fraud by an employee, illness, fraud by an external party and reliance on wrong advice (although this presents a difficult bar to meet where no negligence proceedings have been brought).

The privilege of limited liability is bestowed to directors and their shareholders, via the company, on the basis of the responsibilities that directors bear to ensure that they act in accordance with their duties. A breach of such duties can lead to director disqualification proceedings (which would lead to their inability to act for a company in the future) and personal liability for the losses incurred (despite the assumed “limited” liability of the company).

Contact an expert director disqualification solicitor now

Please contact one of our friendly expert director disqualification solicitors now for your consultation. At Francis Wilks & Jones, we have all director disqualification experience needed to deal with any type of director disqualification problem.  Feel free to look at our website and the many different director disqualification examples of cases where we have successfully assisted our clients.

 

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