Directors cherish their roles, relishing the financial perks and the thrill of steering their businesses through economic highs and lows. However, not all directors play fair, and justice eventually catches up with those who don’t.

According to Tom Fox, Head of Insolvency at Umbrella.UK Insolvency, “Director Disqualifications are on the rise”.  He emphasises that while insolvency experiences can be beneficial, some directors face legal consequences for their actions.

As of the latest data, the Insolvency Service has seen a 36% increase in investigations into alleged misconduct by directors of insolvent companies, compared to the previous year (2022/23). Tom Fox notes, “The number of cases referred to the Insolvency Service’s compliance and targeting department has more than doubled, exceeding 1,000 referrals per month.”

A significant contributor to this surge is the misuse of funds from the Bounce Back Loan Scheme (BBLS). In the 2022/23 financial year, 459 directors were disqualified for misusing Covid-19 support scheme funds, with over a third of disqualifications in April and May 2023 linked to BBLS and CBILS fraud.

What is a Director Disqualification?

Director disqualification is a legal action by the Insolvency Service, prohibiting an individual from acting as a director or participating in company management under the Company Directors Disqualification Act 1986.

Tom Fox explains, “Anyone can report a company director for inappropriate conduct, leading to disqualification proceedings.”

Grounds for Disqualification

Directors can face disqualification for various reasons, including wrongful trading, failure to maintain proper accounting records, non-submission of accounts to Companies House, non-payment of company tax, and personal benefit from company money or assets.

Duration of Disqualification:

Disqualification durations vary, typically lasting two to five years, but serious offences can result in bans of up to 15 years.

Consequences and Appeals:

A disqualified director loses the ability to manage any UK-registered company, with criminal penalties for breaching the order. Appeals are possible, but disqualification periods can’t be reduced to less than two years.

Tom Fox advises, “Directors should seek professional guidance during tough situations.” Our free initial consultation offers impartial advice, tailored to a company’s unique circumstances.”

Directors can choose a quick and easy path to positive changes by reaching out for assistance before restructuring or rescue efforts. As Tom Fox emphasises, “Help is always available for those willing to make the choice to get in touch first.”

For a free initial consultation get in touch with Umbrella.UK Insolvency today on 0800 611 8888 or email help@umbrella.UK