We have been helping directors successfully defend disqualification proceedings since 2002. In that time we have helped 100's of directors deal with the claims and get on with their lives. We can help find the best solution for you too.
Director disqualification claims are brought following an investigation by the Insolvency Service, an executive agency acting under the authority of the Secretary of State for business energy and industrial strategy (“the Secretary of State”).
Directors can be disqualified by the court in other circumstances, most commonly in criminal fraud proceedings or claims by the registrar of companies. Learn more about the circumstances in which a director can be disqualified.
Disqualification following insolvency
Under Section 6 of the Company Directors Disqualification Act 1986, the court has a duty to disqualify an unfit director of an insolvent company. An “insolvent company” is a company which has been placed into one of the following formal procedures under the Insolvency Act 1986:
- liquidation (compulsory and voluntary liquidation, excluding a members’ voluntary liquidation);
- administration; or
- administrative receivership.
Disqualification is usually initiated following a review of matters leading up to the insolvency by the appointed liquidator or the Official Receiver (if there is no independently appointed insolvency practitioner as liquidator). The liquidator will submit a report into the conduct of each and every director of the company to the Secretary of State who may decide to investigate further and ultimately seek an order of court to disqualify the named director(s).
Learn about some of the most common grounds of misconduct which may lead to such proceedings.
Who is named as claimant to a director disqualification claim?
For a majority of cases the Secretary of State who will be named as claimant. However, the Official Receiver may also bring such claims under a delegated authority from the Secretary of State where the company has been subject to a compulsory winding-up order.
In most cases the secretary of state will instruct solicitors to deal with the proceedings and thus (as with all commercial litigation), if a disqualification order is obtained, the Secretary of State will also seek payment of the solicitor’s substantial legal costs.
For this reason alone it is often of great attraction to a director to sign a disqualification undertaking rather than risk the legal costs of director disqualification proceedings.
Who are defendants to a director disqualification claim?
Any director of a company (past or present) can be subject to a director disqualification claim. While conventionally this refers to directors listed at companies house, this is not the sole determining factor (especially as this record is maintained by the company).
A director is an individual who performs the function of a director, regardless of their description or title. Conversely, a director listed at companies house (a “de jure” director) may not be a director, and simply be appointed as a stooge for other more culpable individuals.
Generally, a non-appointed director is described as either a shadow director or a de facto director.
De facto directors
A de facto director is one who acts or holds themselves out as a director, may act on a day-to-day basis in a similar or identical capacity as a director, lead the company internally or in any other way act as a director despite not being formally appointed as one.
Shadow directors do not reveal themselves outside the realms of the board and are often referred to as lurking within the shadows, instead instructing the de jure directors in their day-to-day activities when running the company.
A shadow director is a legal creation defined by Section 251 of the Companies Act 2006 and the Insolvency Act 1986, and often reflects how small companies work with shareholders instructing directors what they should and should not do.
It is essential that a director takes advice from experts in the area of director disqualification as soon as possible after receiving a letter from the Insolvency Service which proposes bringing disqualification proceedings against you.
At Francis Wilks & Jones we are specialists in director disqualification and have many years of experience in this field in the high court and court of appeal. We also have lawyers with previous experience in the Insolvency Service and treasury counsel as well as a dual qualified chartered accountant with expertise in arguing accounting matters. Against this background, we are the UK’s leading firm of director disqualification defence lawyers and will be able to provide you with timely, appropriate and value-added legal advice and assistance. Please call any member of our director disqualification team for help.