Director disqualification process - pre-issue considerations

The director disqualification process usually commences with enquiries by way of a director disqualification letter from the Insolvency Service as to aspects of the previous company which entered into liquidation. Those director disqualification enquiries usually concentrate on areas such as the running of the company, who was in charge of the company, the management of the company and specific questions commonly relating to payment of HMRC liabilities and responsibility for those areas. However, those director disqualification enquiries can cover a wide range of different subjects depending very much upon the nature of the potential director disqualification allegations which the Insolvency Service is considering.

The initial enquiries can take the form of a simple director disqualification letter but commonly, take the form of a director disqualification questionnaire. Those director disqualification questionnaires cover all aspects of the former business including in particular, who was responsible for the management of the company, who was responsible for the finances of the company, were there any external advisers and often, seeks explanations in respect of various individual transactions which it might be looking at more carefully.

With director disqualification questionnaires, it is important to seek proper advice on these. A well worded set of responses can make all the difference. Often, directors with the best of intentions complete the forms and send them back but inadvertently harm their position and more often than not, find that the answers are used as part of the evidence against them in later proceedings. A common question which trips up directors is one along the lines of “In your opinion, why did the company go insolvent”. Careful attention needs to be given to answering those questions which the Insolvency Service often ask in order to trip up directors so that they can bring proceedings against them.

Often, correspondence will go back and forth between the Insolvency Service and the director or his/her legal adviser. If the matter is incapable of resolution, then the Secretary of State will send what is called a Section 16 letter. This is a letter pursuant to Section 16 of the Company Director Disqualification Act 1986 and a letter setting out a summary of the director disqualification allegations against the director and stating that a director disqualification order is in their view, likely to result. The letter always offers a voluntary director disqualification undertaking to the director which can be accepted in lieu of formal legal proceedings against the director.

Many directors believe that they have no alternative but to accept this voluntary director disqualification undertaking but this is not the case. Just because the Secretary of State has set out its grounds for unfitness, does not mean that a director disqualification is necessarily likely. Even if it is, it can often be for a lesser time than the period on offer. Again, expert director disqualification solicitor advice should be sought at this stage.

After receipt of the director disqualification Section 16 letter, it is possible to ask for the draft director disqualification affidavit evidence from the Secretary of State to be sent through. We would always recommend this as otherwise, the director only has very sketchy and limited information relating to the allegations of unfitness. The actual draft evidence which the Secretary of State is obliged to provide upon request or set out in far more detail the allegations against a particular director. It is very useful to ask for this because commonly, it will not have been prepared and the Secretary of State will have to go away and do more work to prepare it. Secondly, it will allow the director and/or its legal advisers to properly consider the nature of the director disqualification claims against the director. We would always recommend doing this as otherwise, you risk giving a voluntary director disqualification undertaking in circumstances where the evidence simply does not support that.

Contact expert director disqualification solicitors now

Francis Wilks & Jones is the county’s leading firm of director disqualification solicitors. We are genuine experts in what we do with a combined experience of over 50 years in director disqualification claims. Contact one of our friendly expert solicitors now for your consultation.


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