Insolvency fraud investigations & director misconduct

Are you worried about insolvency fraud and director disqualification, if so get advice on how to avoid disqualification whilst ensuring your actions remain lawful if your company is facing insolvency

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Understanding director disqualification and misconduct

If it looks like your business could be approaching insolvency there are certain duties and responsibilities placed on you as a director which you are required to adhere to.  Failure to meet these legal director responsibilities could result in claims and or a Disqualification Order being issued against you under the Company Directors Disqualification Act 1986.

An Insolvency Service review of directors’ conduct is part and parcel of a company being placed into administration or liquidation and will be conducted by the office holder, who is either the Official Receiver or an appointed insolvency practitioner.  Any evidence of misconduct found must be reported to the Insolvency Service.  There is a risk that the review could turn into a criminal investigation if there are signs of serious wrongdoing, such as fraud.

An Insolvency Service investigation will include fact-finding, exploring the company records and conducting interviews with company directors, shadow directors, employees and external stakeholders.

What constitutes unfit conduct?

  • Director wrong doing can take many forms although the most notable examples include:
    Misuse of Bounce Back Loans.
  • Fraudulent or wrongful trading.
  • Preference payments or transactions at an undervalue.
  • Unlawful dividends.
  • Serious breach of directors’ duty.
  • Trading to the detriment of the Crown.

Mike Jenner

Director & Head of Investigations

Mike is a Director and fraud investigator heading up the investigations team specialising in all aspects of contentious insolvency as well as protecting the interests of creditors of insolvent companies and individuals.

A Certified Fraud Examiner with over 35 years’ experience in investigative insolvency who works closely with solicitors and barristers at all stages of litigation from pre-issues of proceedings to trial.   Highly experienced in all aspects of asset tracing and recovery, civil litigation, settlement negotiation, investigative interviewing, fraud investigation, anti-money laundering, directors’ disqualification and prosecution and has sector experience in payroll fraud.

Awarded Certified Fraud Examiner status by the Association of Certified Fraud Examiners in 2002 and is a member of the Fraud Advisory Panel.

What happens if you are disqualified as a director?

A disqualification Order prevents an individual from acting as director or business manager without the prior agreement of the court for the period of the Disqualification order which could be up to 15 years …

You must also not be directly or indirectly involved with the setting up, management, or promotion of a company or limited liability partnership during the period of your Disqualification order. This can turn the insolvent company landscape into a complete minefield for you. Without clear and accurate direction, you could become disqualified and personally liable for the company’s debts.

As an alternative to a Disqualification order, you may choose to voluntarily sign a disqualification undertaking which means that proceedings don’t go through the court. However, the restrictions imposed on you will be the same as those detailed above and if an undertaking or order is breached you may face a prison sentence of up to two years plus a further period of disqualification.

Consequences of director disqualification

A Disqualification order may also affect you from acting as a director or being involved with the setting up, management, or promotion of a company or limited liability partnership, it may also affect other areas of your life, such as:

  • Schools may prevent you from becoming a governor.
  • You won’t be able to continue to act or become a trustee for a charity without leave from the court or the Charity Commission.
  • Health and social care organisations may bar you.
  • Professional bodies may need to be contacted and may ban you from being a member.
  • Banks may decline to provide services or loans.
  • You cannot stand as a member of Parliament.

Am I at risk of disqualification?

As part of the administration and liquidation proceedings an initial investigation is conducted by the appointed insolvency practitioner or Official Receiver and a summary sent to the Insolvency Services detailing the conduct of all directors who were in office during the three years prior to the insolvency appointment. The Insolvency Service acts on behalf of the Secretary of State and they ultimately decide whether it is in the public interest to begin further investigations into the actions of individual directors.

With the added pressure of creditors demanding payment this can be an extremely challenging time. We are able to provide you with pre insolvency advice and guidance to help minimise the risk that you might be disqualified from acting as a director of a company in the future.

How can McTear Williams & Wood help you?

  • Clear and accurate advice – to ensure you adopt a proper course of action to avoid being disqualified.
  • Responsive service – we understand that business is an ongoing process and will always be able to answer your calls and questions in a fast and responsive manner, giving you the information you need to make the right decision.
  • Past experience – although insolvency can be a difficult process we have helped hundreds of directors keep within the law.

Act now and avoid disqualification

If you are concerned it is vital you act now and work with a licensed insolvency practitioner who understands how to navigate the numerous potential pitfalls. By contacting McTear Williams & Wood you can safeguard yourself from being deemed as unfit to act as a director. Contact us now on 0800 331 7417

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