This is the next in the series of blogs for the Director’s Friend.
If a director of an insolvent company is investigated by the Insolvency Service, an application for director disqualification follows and an order or undertaking is obtained. Then the director cannot ‘act in the management’ of a company for the period of time that they are disqualified absent leave of the Court.
Leave of the Court will be the subject of a separate blog by me in the future.
If a director is then subsequently found to be in breach of their disqualification then that (amongst other issues) is a criminal offence.
The penalty for a breach is set out in section 13 of the Company Directors’ Disqualification Act 1986 (‘CDDA’) as:
‘(a) on conviction on indictment, to imprisonment for not more than 2 years or a fine, or both; and
(b) on summary conviction, to imprisonment for not more than 6 months or a fine not exceeding the statutory maximum, or both.’
Therefore, it can be seen that the penalties are serious.
There is, however, currently a consultation by the Sentencing Council (the ‘Council’) in respect of what is described as a breach offences guideline consultation (the ‘Consultation’). This is to seek the views of as many people as possible interested in sentencing of breach offences.
The Council confirm at page 44 of the Consultation document that a director disqualification can be imposed by the Court as an ancillary order on conviction or as a result of bankruptcy and insolvency proceedings. The Council also confirm that there is no reasonable excuse defence included in the statutory provisions as there is for some other offences.
The point of the Consultation is that the Council confirm that there is no existing guidance available for sentencing this breach.
The Council then put forward thoughts under the headings of culpability, harm and whether there are any other additional aggravating or mitigating factors to take into account. The draft guidelines are set out at page 101 of the Consultation document.
The consultation will end on 25 January 2017.
It is interesting to be reminded that there is currently no specific sentencing guidelines for breach of director disqualification and there is now an opportunity to provide input. In my professional experience I have not seen too many prosecutions for breaching a director disqualification order or undertaking, but it does happen.
A case always turns upon the facts, but one way of protecting yourself (if you are disqualified as a director) is to apply to court for leave to act as a director whilst disqualified (usually at or around the time of that disqualification). That is under section 17 of the CDDA. As above, I will prepare a separate blog on this subject later.
If you are faced with an application for director disqualification, or you are threatened with a prosecution please talk to me today. This is in order to protect your position without delay. The earlier that you speak with me the more I can help. Why not call me today on 01992 558411 and speak to me without obligation, pressure or cost.
If you are happy to instruct me, my firm and I are happy to talk to you about fixed fees or staged fees that are agreed with you in advance of any work being carried out. Your work will be carried out by me or others under my close supervision. Finally, I am happy to come to you to take instructions.
Until next time,
THE DIRECTOR’S FRIEND