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DIRECTORS
DISQUALIFICATION - A GROWING TREND!
When a company goes into voluntary liquidation,
if an Administration Order is made against it, or it has an Administrative
Receiver appointed
or it is wound up by the Court, the liquidator of receiver has a duty
to report any unfit conduct by directors to the Secretary of State.
The facts are examined, and if it is in the public interest, proceedings
are started for the disqualification and prosecution of the directors.
We are starting to see much higher levels of
directors disqualifications than hitherto, and which have risen from
374 in 1993 to 1480 in 1998
with a further 2000 or so proceedings currently in Court awaiting conclusion,
and probably another 2000 cases under examination. A "National Daily" recently
listed 2000 directors who had been disqualified in the previous year!
A growing and worrying trend, I would suggest.
There is a view that the New Labour's emphasis
on the "enterprise culture" will
have an increasing and detrimental effect on these statistics. On one
hand a much more gentle approach to corporate misdemeanour (or mis-management),
will encourage the new "entrepreneurs" to start up again …….….
and again. That, coupled with a greater encouragement to take higher
risks in business, in a brittle economy, will lead to higher levels
of business failure and ultimately more disqualifications.
Inevitably some directors of businesses, in serious financial difficulties,
will always do the wrong thing - take on more credit, prefer some creditors,
produce false information to banks, switch money between accounts and
other businesses, get rid of their personal guarantees and so on. Some
action may be legitimate, many won't.
Our advice has always been to seek professional help from an Insolvency
Practitioner sooner rather than later - and to take further advice
as conditions change. Inevitably there will be a reluctance to incur
a new set of costs (and fees) - but in the cold light of day, they
should be regarded as a tax deductable insurance against possible directors
disqualifications or prosecution. If you would like further information
on this growing problem area and would like to talk to a partner please
telephone Jeremy Priestley on 0114 275 5033 without delay.
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