Acting contrary to the Public Interest

Directors Disqualification proceedings are bought by the Insolvency Service, against directors who have been involved in companies who have become insolvent and have, as a result, been put into liquidation or administration. 

Director Disqualification is a regime designed to protect the public interest by preventing individuals, who are found to have abused their position as a Director, from repeating such behaviour using the guise of another company.

There are numerous allegations of misconduct which can lead to a Director being disqualified, but often these investigations are after the event, where evidence may have been lost or the value diminished following the effluxion of time.

However, public interest concerns may be raised much earlier following complaints brought by the public upon which initial enquiries may be made by Companies Investigation, which is a department within the Insolvency Service (which acts on behalf of the Secretary of State in respect of such matters).

What is done to Protect the Public Interest?

Where a complaint is received, or if concerns are delivered to the Secretary of State via alternate means, upon review steps may be taken to investigate such matters by a government department with the not unusual title “Companies Investigations”.

These investigations may lead the Secretary of State to wind-up the company being investigated, regardless of whether it is solvent or insolvent.  

For more information please see our webpage here which deals with public interest investigations and winding-up processes.

Public Interest and Director Disqualification

As stated above, if a director is believed to have acted in a way which is contrary to the public interest then this could lead to a finding of unfitness, as set out within Section 6 of the Company Directors Disqualification Act 1986.

“Contrary to the public interest” can include circumstances where a company has been wound-up on public interest grounds or where a company has been placed into insolvency in more conventional circumstances, and investigations into the Directors’ conduct has revealed misconduct which is not considered to be in the public interest.

Public Interest Winding-Up: Examples of Misconduct

Where the Secretary of State winds-up a company on public interest grounds, this will almost certainly lead to Director Disqualification proceedings being issue.

The types of misconduct that commonly lead to disqualification may include fraudulent miss selling, where promises are made to attract customer monies that could never possibly be fulfilled, boiler room frauds where offices are set up to cold call individuals for investment in one of many popular scams with little or no prospect of a return and, more recently, popular frauds including the sale of renewable energy investment and carbon credits.

The list is endless and changes in accordance with changes in legislation and enforcement steps by HMRC and the Insolvency Service.  We address a small amount of some of the more popular here

Directors and their involvement

Disqualification proceedings are brought against Directors involved in such schemes with the aim of preventing them from repeating the scheme under the guise of another limited company.

However, it is often the case that Directors are innocent victims of more culpable third parties (i.e. Shadow Directors) who often benefit from the scheme.  

Whilst innocence is no defence, it may be that the Director became involved in the company’s business for legitimate purpose and, as we repeat throughout our pages on Director Disqualification, each case has to be judged on its own merits and it is often the case that unless the Court hears the evidence and assesses the Director’s character, then the partisan approach of the Insolvency Service may force a Director to accept a Disqualification Undertaking despite having a strong case.

At Francis Wilks & Jones we have considerable experience of Director Disqualification matters, dealing with representations on the above and many other issues that you may not have previously considered, as well as acting for Directors in litigated Disqualification proceedings.

Please call any member of our Director Disqualification team for a consultation now on 020 7841 0390. Alternatively please email us with your enquiry and we will call you back at a time convenient for you.