According to reports, the number of directors receiving bans of more than 5 years has reached a 6 year high. 573 director disqualifications were made lasting more than 5 years. It is possible to be banned for up to 15 years.
For the 2016/2017 year-to-date (YTD), 1,104 Director Disqualification Orders and Undertakings have been issued by the Insolvency Service. This includes 199 orders and 905 undertakings. In comparison, 1,210 orders and undertakings were issued for the whole of 2015/2016.
Orders and undertakings do more or less the same thing. Whereas an order can be applied by a court to ban a director deemed to be in breach of their duties, an undertaking does not require court proceedings. Instead, the Secretary of State can accept an undertaking request sent personally from a director.
In terms of length of ban, disqualifications were served as follows:
• 2–5 years: 586
• 5–10 years: 388
• 10–15 years: 130
Acting as a director, even if you are not appointed as one officially, is a criminal offence whilst being disqualified and if the company becomes insolvent then you can be personally liable for the debts.
The grounds for getting disqualified are many and varied but in most cases it would be plainly obvious to the director that they have acted wrongly. The old adage is if it feels wrong then it is!
Typical cases involve the following;
- Enriching oneself to the detriment of the company ie taking vastly inflated salaries.
- Racking up debts when you know there is no reasonable chance of these debts ever being paid back.
- Deliberately paying members of your family or friends ahead of other creditors
- Conducting fraud whilst being a director and using the company to perpetrate that fraud.
- Failing to keep any proper records of the dealings of the company
- Deliberately failing to notify HMRC of any tax due.
Categories: Implications for Directors