Directors

Director Duties

If your company is consistently unable to meet financial obligations and/or its liabilities exceed its assets, it is currently operating in a state of insolvency. As the director of a company that is trading insolvent you have certain duties and responsibilities, as required by legal regulations.

If you fail to uphold these responsibilities you could be accused of wrongful trading and held personally liable for the repayment of certain company debts.

 

Directors Disqualification

You can be banned (‘disqualified’) from being a company director if you fail to meet your legal responsibilities.

‘Unfit conduct’ includes:

• allowing a company to continue trading when it can’t pay its debts
• not keeping proper company accounting records
• not sending accounts and returns to Companies House
• not paying tax owed by the company
• using company money or assets for personal benefit

 

How disqualification works

The Insolvency Service may investigate your company (or you personally as a director of your company) if it’s involved in insolvency proceedings or if there’s been a complaint.

If they think you haven’t adhered to your legal responsibilities as a director, they will inform you in writing:

• what they think you’ve done that makes you unfit to be a director
• that they intend to start the disqualification process
• how you can respond

You can either:

• wait for The Insolvency Service to take you to court to disqualify you – you can defend the case in court if you disagree with The Insolvency Service
• give The Insolvency Service a ‘disqualification undertaking’ – this means you voluntarily disqualify yourself and ends court action against you

You may want to seek legal advice if you receive a letter about disqualification from The Insolvency Service.

You’re automatically disqualified from being a company director if you’re declared bankrupt.

 

If you are disqualified

You’ll be disqualified for up to 15 years.

You can’t:

• be a director of any company registered in the UK or an overseas company that has connections with the UK
• be involved in forming, marketing or running a company

 

Remember:

In troubled times:

• Do get professional help without delay
• Be honest with yourself and your employees
• Don’t bury your head in the sand, problems rarely go away
• Don’t make promises you cannot possibly keep
• Do talk to your bank and creditors
• Don’t ignore legal documentation