Disqualification of a business director or officer is an action taken by a company, statutory regulator or other third party to limit the ability of a private person to serve as a director once again in that company, or in any other business, for a particular period of time.
Such action might be set off by particular events and scenarios. Disqualification of directors is not as unusual as you might think. In fact it’s rather typical and takes place regularly than you might recognize, countless directors having actually been disqualified over the years in the UK.
This post will describe exactly what disqualification is and when it could occur to you. It will also offer some important tips 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 imposed by a company’s shareholders, lenders or a regulator. The function is to safeguard lenders and investors by restricting the capability of a company director to serve as a director once again because business or in any other company for a specific amount of time. Director disqualification can be activated in circumstances where a director is involved in a company scams or business misconduct. Where a company’s directors have engaged in fraudulent activity that has resulted in a loss to the business. Director disqualification can also occur in relation to non-disclosure/misrepresentation to the business’s investors, directors, auditor or an external regulator.
When Can a Company Director Be Disqualified?
The most common triggering events for director disqualification are: Liquidation – The director of a business that has been liquidated will be automatically disqualified as a director for a period of five years from the date of the liquidator’s last report. Note: There are some circumstances where the liquidation of a company does not instantly lead to director disqualification.
Liquidation of a business occurs when: – the company is not able to pay its financial obligations and the creditors designate a liquidator to take control of the business’s possessions, offer the possessions and disperse the profits among the financial institutions – the company’s investors decide to end up the business and terminate its existence – the company is unable to operate as a going concern and a court has 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 scenario.
Company fraud – A director who has been associated with a company fraud, could, as soon as condemned as a result of the investigation by the Serious Fraud Office (SFO) or a similar external regulator (e.g. the Securities and Exchange Commission) be disqualified)
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Company misconduct – A director who has been associated with company misbehavior may be automatically disqualified in cases where an examination has actually been undertaken by a statutory regulator (e.g. the Financial Markets Authority’s examination of insider trading). Note: There are some situations where a director who has been associated with a company fraud or misconduct will not be automatically disqualified as a result of the investigation by the SFO or a similar external regulator.
What To Do If You Are Threatened With Director Disqualification
If you are threatened with director disqualification you must act rapidly to resolve the scenario. First of all, you ought to try to fix any damage to your track record at the earliest chance. You should also consult from a trustworthy business solicitor who is familiar with director disqualification proceedings. The solicitor needs to have the ability to offer suggestions on the most likely outcome of the disqualification procedures versus you and the steps you can require to decrease the repercussions. If you have actually been involved in business scams or misbehavior you should think about entering into a settlement with the relevant celebrations. Depending upon the situations, you might be able to work out a settlement that will lead to director disqualification being prevented.
Conclusion
Director disqualification is a severe sanction that will adversely impact a director’s professional credibility. If a director is disqualified, she or he will be unable to serve as a director of a company for a particular period of time. The most typical causes of director disqualification are liquidation, voluntary administration or receivership, business fraud or business misconduct. If you are threatened with director disqualification, you need to act rapidly to fix the situation consulting from a trusted business lawyer who is familiar with director disqualification procedures.