Claims by Companies House can be both frightening and serious. They can lead to fines and / or disqualification from acting as a director. However, the team at Francis Wilks & Jones has years of combined experience dealing with claims of this nature. Contact one of our friendly expert team and we can help.
Companies House is where lots of company information is held and made available to the public.
This includes information on
- the company’s constitution;
- who its directors are;
- who its owners are;
- its financial performance;
- its assets;
- its secured liabilities; and
- any notice of insolvency or dissolution.
Companies House is largely not policed and therefore relies on the input of the companies to ensure the accuracy of such information, which in most cases is un-audited and is not otherwise verified.
Statutory duty to file documents at Companies House
As a result, companies have statutory requirements to file documents at Companies House, including the following
- a requirement to file an annual confirmation statement (which used to be an annual return but was changed in 2015). This must be filed within 14 days of the end of each financial year); and
- a requirement to file financial accounts (prepared dependent on the size and status of the company) within 9 months of the end of the financial year (unless the company is filing its first accounts, when the period for filing them is extended to 21 months).
The above is rigorously controlled and is a cost of the limited liability protection that enables companies to exist and for businessmen to promote their business ideas.
Sanctions for failing to comply with statutory duties
In the absence of failing to comply with a company’s obligations, the Registrar of Companies may
- dissolve the company;
- fine the company;
- fine the directors of the company;
- for directors who have been fined at least two times previously, disqualify those directors.
Notice from the Registrar of Companies’ solicitor
Notice should be received from the Registrar of Companies’ solicitor following expiry of the above periods. During 2020, the Corporate Insolvency and Governance Act 2020 extended some of these deadlines.
- the notice of a fine or proposed dissolution may be received by the company, followed by notice sent to the directors personally;
- from experience, not all of these options are pursued simultaneously;
- if no further action is taken, the fine / dissolution will occur. The fine is a criminal penalty.
Directors (and indeed the company) may enter into negotiations with the Registrar of Companies’ solicitor to seek an agreement that in light of mitigating circumstances a prosecution/dissolution does not proceed. However, the mitigating will rarely include commercial difficulties, as almost all companies have commercial difficulties and this would set a dangerous precedent.
Disqualification as a director
Being disqualified as a director is very serious. Where a company has committed the above wrongs (or any repeated breach of the companies legislation) on three occasions (including any current one and a repeat of a previous offence) then the Registrar of Companies has a duty to protect the public interest and ask the court to consider disqualifying the director(s) under the Company Directors Disqualification Act 1986.
- disqualification as a director can have a serious impact, unlike the criminal fines which whilst significant are not costly when compared to the value of the trading business;
- an order disqualifying a director will mean the director(s) cannot be involved in the promotion, formation or management (or act as a director) of any limited company in the UK, unless they obtain permission of the court (see below).
At Francis Wilks & Jones we have an office in Cardiff and can attend sentencing hearings at the Cardiff Magistrates Court with a view to persuading the court not to disqualify a director who may otherwise be accepting the criminal fine as described above.
A director can be disqualified for any period up to 5 years summarily or on indictment. Usually the order made will state when the disqualification period will commence (usually in the future, to enable the director to arrange their affairs).
Seeking court permission to remain / act as a director
Where a director(s) have been disqualified under the above provisions, there is a statutory mechanism to enable the director(s) to ask a commercial court that they be given permission to act (despite the disqualification) of one or more certain specified companies.
Our detailed web-page on applying for permission to act as a director explains more. Permission can be applied for equally where a director has been disqualified following a company’s insolvency as it does to circumstances where a director is disqualified for failing to file the necessary companies’ returns as described above.
At Francis Wilks & Jones we have considerable experience dealing with both Companies House prosecutions and seeking permission to continue acting as a director where you have been disqualified.
Should you require any assistance, please contact our director services team who can discuss such matters with you.