Director Disqualification After Insolvency: What You Need to Know
Insolvency does not automatically disqualify a director. Conduct can.
The Insolvency Service may investigate directors where companies enter insolvency proceedings. Examples of conduct capable of raising concerns include continuing to trade to creditors’ detriment, failing to keep proper records, tax failures, misuse of company assets and failure to co-operate with an office-holder. Disqualification can last between 2 and 15 years.
What this means for the director
Do not treat an enquiry as proof of wrongdoing. Do not ignore it either.
The correct response begins with the history of the company and the evidence supporting the decisions taken.
What happens next
For formal insolvency cases, the office-holder reports on director conduct. The Insolvency Service may decide to investigate further. The eventual outcome depends on the evidence and circumstances.
Investigation timeline
- 1
Insolvency event
The company enters a formal insolvency process.
- 2
Office-holder conduct report
The office-holder reports on director conduct.
- 3
Insolvency Service decision
A decision is taken on whether to investigate further.
- 4
Information and representations
Evidence and representations are considered.
- 5
Outcome
The exact route varies by case.
Issues to establish
Period of directorship. Actual role in management. Financial information available. Board decisions. Accounting records. Tax compliance. Creditor treatment. Asset transactions. Connected-party transactions. Advice received. Co-operation with the office-holder. Any correspondence from the Insolvency Service.
Questions directors usually ask
Does every liquidation produce a ban?
No.
Can disqualification affect running another company?
Yes. Disqualification restricts acting as a director and involvement in company management subject to the applicable rules.
Should I respond to an Insolvency Service enquiry?
Do not ignore it. The nature of the request and any legal obligation to respond should be established, and professional advice may be appropriate.
Related authority pages
General information disclaimer
General information only. Insolvency, tax and director-liability outcomes depend on individual circumstances. Nothing on this page constitutes legal, tax or insolvency advice. Where insolvency is suspected, advice from an appropriately qualified professional should be obtained promptly.
Establish your position
An allegation is not the evidence. The evidence is the evidence. Build the chronology. Preserve the records. Understand the issue being raised.