Government cracks down on insolvent directors

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The average length of disqualifications for directors of insolvent companies has increased 11.7% since last year.

The average duration of disqualification orders imposed on Directors by the Insolvency Service has climbed to 6.48 years in 2008-09, from an average of 5.8 years of disqualification in 2007-08, according to City law firm Reynolds Porter Chamberlain LLP (RPC).

Disqualification orders ban individuals from being directors or taking part in the creation or promotion of a limited company for up to 15 years. Although disqualification orders allow individuals to go into business as sole traders it means that in the future they will have unlimited liability for the losses of that business.

The figures show that the government is intensifying its efforts to deter bad behaviour by...

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By eddybee
06th May 2009 12:38

Ostrich mentality
If you talk to most insolvency practitioners you will hear the view that businesses wait too long to ask for help and many could be saved if the owners/directors didn't put their heads in the sand.

The responsibilities of directors change when they OUGHT TO HAVE KNOWN that the company is insolvent and great care is required. Poor accounting and lack of forward thinking will increase the risk of disqualification.

The exposure to directors (and shadow directors) in insolvency situations was mentioned in an
article in March when I was speaking to Mark Lee of the Tax Advice Network. The article talks about the role that part time FDs can play in keeping businesses out of trouble (and driving business forward) and also compliment the services of accountancy firms.

David Lewis
Camrose Consulting


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05th May 2009 23:09

The 3 bands

Some years ago a Court said this:-

‘(1) The top bracket of disqualification for periods over ten years should be reserved for particularly serious cases. These may include cases where a director who has already had one period of disqualification imposed on him falls to be disqualified again.

(2) The minimum bracket of two to five years disqualification should be applied where, though disqualification is mandatory, the case is, relatively, not very serious.

(3) The middle bracket of disqualification for from six to ten years should apply for serious cases which do not merit the top bracket.’

I believe those guidelines are still followed.

The case was Re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164.

David

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