Director Disqualification And What To Do If You Are Threatened With Disqualification
Disqualification of a business director or officer is an action taken by a company, statutory regulator or other third party to restrict the ability of a specific person to function as a director again because business, or in any other company, for a specific time period.
Such action may be set off by specific events and circumstances. Disqualification of directors is not as unusual as you might think. In fact it’s rather common and happens more frequently than you might understand, thousands of directors having been disqualified throughout the years in the UK.
This post will explain just what disqualification is and when it might happen to you. It will also provide some important ideas on what you can do if you are threatened with director disqualification.
NDandP - Specialists in Director Disqualification
What Is Director Disqualification?
Director disqualification is a sanction enforced by a company’s investors, lenders or a regulator. The purpose is to secure creditors and investors by restricting the capability of a company director to function as a director once again in that business or in any other company for a specific time period. Director disqualification can be triggered in scenarios where a director is involved in a company fraud or company misbehavior. Where a business’s directors have actually engaged in fraudulent activity that has actually resulted in a loss to the business. Director disqualification can also occur in relation to non-disclosure/misrepresentation to the company’s shareholders, directors, auditor or an external regulator.
When Can a Company Director Be Disqualified?
The most typical triggering events for director disqualification are: Liquidation – The director of a company that has actually been liquidated will be immediately disqualified as a director for a period of five years from the date of the liquidator’s final report. Keep in mind: There are some scenarios where the liquidation of a business does not instantly result in director disqualification.
Liquidation of a company happens when: – the business is unable to pay its financial obligations and the lenders appoint a liquidator to take control of the business’s possessions, sell the properties and distribute the earnings amongst the creditors – the company’s investors decide to end up the business and end its presence – the business is unable to run as a going issue and a court has actually purchased the company to be wound up.
Voluntary administration – A director of a business that is in voluntary administration could be disqualified as a director under particular circumstance.
Company scams – A director who has been involved in a business fraud, could, when found guilty as a result of the examination by the Serious Fraud Office (SFO) or a comparable external regulator (e.g. the Securities and Exchange Commission) be disqualified)
Business misconduct – A director who has been involved in business misbehavior may be automatically disqualified in cases where an investigation has been undertaken by a statutory regulator (e.g. the Financial Markets Authority’s examination of insider trading). Note: There are some scenarios where a director who has actually been involved in a business scams or misconduct will not be instantly disqualified as a result of the investigation by the SFO or a comparable external regulator.
What To Do If You Are Threatened With Director Disqualification
NDandP - Specialists in Director Disqualification
If you are threatened with director disqualification you need to act quickly to fix the situation. You need to attempt to fix any damage to your track record at the earliest opportunity. You should also seek advice from a credible corporate lawyer who is familiar with director disqualification procedures. The solicitor must be able to provide advice on the most likely result of the disqualification procedures versus you and the steps you can take to reduce the effects. If you have actually been associated with company scams or misbehavior you should think about entering into a settlement with the appropriate parties. Depending upon the situations, you may be able to negotiate a settlement that will lead to director disqualification being avoided.
Conclusion
Director disqualification is a severe sanction that will negatively affect a director’s expert reputation. If a director is disqualified, she or he will be not able to function as a director of a business for a specific time period. The most typical causes of director disqualification are liquidation, voluntary administration or receivership, company fraud or company misbehavior. If you are threatened with director disqualification, you need to act rapidly to resolve the situation consulting from a reputable business solicitor who is familiar with director disqualification procedures.
NDandP - Specialists in Director Disqualification
