How To Avoid Director Disqualification

Failure to meet your responsibilities as a company director exposes you to the risk of disqualification. If you are disqualified you will no longer be able to act as a company director,for a given period,without the permission of the relevant court.

The Company Directors Disqualification Act of 1986 defines the rules of disqualification. In addition to being prohibited from acting as a director,disqualified directors are also restricted from asking a third party to manage a company under their instruction.

Disqualification normally runs for a 15 year period. Breaching the disqualification rules however,may lead to an extension of this period plus potentially a two year jail sentence.

As you can imagine,a disqualification can have a significant impact on your professional and personal life; something you will want to avoid at all costs.

Common Reasons For Disqualification

Before looking looking into a director,the Insolvency Service always starts if it finds a good reason to do so.

Here are some of the common ones:

• Unfit conduct

• Failure to maintain proper books

• Failure to file tax returns on time and/or refusal to pay the company’s taxes

• Utilizing company items for personal expenses

• Exercising bias when paying creditors during insolvency

The above is a list of some of the common causes of a disqualification,even though the complete list is longer.

Not Getting Disqualified

Here’s a short list of some of the steps you can take to avoid disqualification.

First Keep To The Rules

There are lots of reasons why the Insolvency Service might apply for an order to have you disqualified from acting as a director,as shown above. Now that you have a clear idea of what these factors are,keeping to the rules can help you avoid disqualification in the first place.

As a director,you should ensure that proper accounting records are kept,returns are filed and taxes paid within the set deadlines etc.

Have A Good Understanding Of Your Duties As A Director

If you do not fulfil the proper duties as a director your legal duties as a director} amounts to grounds for an investigation into your conduct. This makes it essential that you familiarize yourself with all your duties,in addition to doing your best to fulfil them.

Blaming your failures on ignorance or other officials working under you will not help you avoid disqualification!

Insolvency issues

Continuing to trade after the company is declared insolvent is one sure way to a disqualification. To make sure that your actions do not lead to a disqualification,be sure to seek professional insolvency advice as soon as you discover that the company is facing serious financial problems. This advice should be documented for use in any disqualification proceedings.

If trading continues even after you discover the signs of insolvency,document the reasons why you are still operating,and keep records of how you are tracking the company’s financial well being to make sure that you can see when to cease operations.

Using the above tips will help you to avoid disqualification. But,if you do end up facing allegations that may lead to a disqualification,these tips can also help you explain why you did what you did to investigators from the Insolvency Service and even a court of law.

For more assistance please do contact https://www.ndandp.co.uk

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