Section 13 Criminal proceedings

Corporate fraud, or indeed any fraudulent transaction when dealing with another’s money (whether that be an individual, company or financial institution), can result in criminal proceedings being brought against the wrongdoer.

Criminal proceedings for fraud and similar crimes serves to prosecute Directors of companies liable for such wrongs for what is essentially theft – whether that be promising something which the company/its Directors had no intention of delivering or whether that is a promised investment return which was never likely to delivered.

Where such crimes exist, and the Crown Prosecution Service issue a summons to prosecute the Directors of that company, then the Court may additionally decide to disqualify any such guilty Directors.

We discussed the circumstances of disqualification in general criminal proceedings here.

Disqualification Breaches

Where a Director is disqualified from acting as a Director, or in the “promotion, formation or management” of a company, then it is misconduct to go on and ignore this prohibition and act in breach of a Disqualification Order or a Disqualification Undertaking.

Where a company is placed into insolvency, even where no evidence of misconduct exists then an individual (who was previously disqualified) may be disqualified again (and for a much longer period) for acting whilst disqualified.

We discuss these issues, and where such misconduct arises from an individual acting as a Shadow or De Facto Director, in more detail here.

Issues of Concern when facing Disqualification

Where an individual faces the prospect of being disqualified again for acting in breach of his/her previous disqualification, this misconduct will be considered very serious justifying a top bracket disqualification period of between 10 – 15 years.

In such circumstances, it may be the case that the individual targeted has concerns about the costs of legal proceedings or wishes to dispose of the potential disqualification claim for other reasons by offering a Disqualification Undertaking.

However, by agreeing to be disqualified as a Director on the basis of such allegations of misconduct then that individual faces the risk of being liable for prosecution, particularly as the evidential threshold in the disqualification proceedings is lower (meaning a successful prosecution may be inevitable where the evidence was sufficient to obtain a Disqualification Order or persuade the Director to be disqualified in civil proceedings).

Prosecution under Section 13 Company Directors Disqualification Act 1986

This is a specific statutory criminal penalty which provides that an individual may be so liable to be prosecuted in the following circumstances:

As such proceedings are criminal proceedings, the evidential requirements for the prosecution and the defence differ to that of civil proceedings – there is a requirement for the prosecution to more strongly prove their case.

As a result, if the claim in the civil Director Disqualification proceedings is more contested it is conceivable that the same case brought by the Insolvency Service may have difficulty reaching the evidential threshold required for criminal proceedings.

If you wish to be directed to a criminal solicitor capable of dealing with any prosecution you face, please contact us and we can recommend a suitable firm.

Criminal Penalty

If a Director is subject to criminal proceedings brought under section 13 of the Company Directors Disqualification Act 1986, then the prosecution may be brought in the Magistrates Court (referred to as “a summary conviction”) or in the Crown Court (referred to as “an indictable conviction”).

The Court in which the prosecution is brought will be determined by the severity of the offence. 

The criminal penalty, if the individual is found guilty, will be a custodial sentence in accordance with the following:

  • For a prosecution in the Magistrates Court, imprisonment up to 6 months; or
  • For a prosecution in the Crown Court, imprisonment up to 2 years.

In addition to the above custodial sentences, an individual subject to prosecution may also be liable for a fine.

At Francis Wilks & Jones we can assist in anticipating such problems and managing the outcomes (where being disqualified is a possibility) so as to cause the least inconvenience or disruption to you or your company.  We can also recommend a criminal solicitor, should you require such assistance.

Please call any member of our Director Services Team for your consultation now on 0207 841 0390. Alternatively email us with your query at info@franciswilksandjones.co.uk and we will call you back at a time convenient for you.