Many people may not know what director disqualification is, since it’s not a common term. Director Disqualification refers to when a company director gets disqualified from forming, promoting, or running a company, and it occurs when the said person is found guilty of legal responsibilities. Different clauses may render one disqualified. This article will discuss more concerning Director Disqualification and what happens when such an ax falls on you.
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Reasons which lead to director disqualification
There are several reasons which can lead to a director getting disqualified from carrying duties in a company. Such bases depend on an individual and the company they are running. If you feel that you are near being disqualified, specialists at https://www.ndandp.co.uk/director-disqualification/ advise that you seek a solicitor involved with director disqualification cases to handle your case before things go south. Some of the reasons for disqualification include; carrying out an illegal business, failing to file company tax returns and accounts as required, inappropriate conduct in case of an insolvent company, and a breach of competition law. When something like this happens, you need to contact your attorney and see if you can salvage the situation.
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Direct disqualification procedure
Every company that gets into liquidation, receivership, or administrations has its directors under check. In case of any misconduct or any other issues, the checking officer can report these issues to the Insolvency service. After registering, the Insolvency service files a lawsuit and asks for an insolvency order.
The disqualification order can take a minimum of 2 years and a maximum of 15 years, depending on the inappropriate conduct. It’s the court that decides the kind of disqualification to apply to a director. You can also individually ask for disqualification as a director if you feel there will be a court case under your name. In this case, you will lessen your disqualification period or have fewer penalties.
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Unfit conduct
What makes a director get disqualified? Other than the above reasons, the court has to check other factors to determine if the director’s standards are incompetent and unfit to hold the director’s position. Behaviors which get taken into account include:
- Director trading with an insolvent company
- Not keeping financial records of the company
- Fraudulent activity
- Failing to pay tax
- Failing to file returns as required by the law
- Attempts of depriving assets to creditors
- Using company money and properties for personal benefit
- Un-discharged bankrupt
- Failing to keep the company requirements
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Effects of disqualification
When a director gets disqualified, they are prohibited from taking any company duties either with the immediate company or any other company they might hold in the future until the set period ends. They are prevented from forming any company, managing or promoting it. Such directors will also not be able to hire staff or undertake executive decisions. Other related exclusions include holding different positions such as school boards, health authorities, charities, and other related posts. They will also not be able to act as accountants, pension trustees, barristers, or solicitors.
When a director gets disqualified, they cannot appoint anyone to act on their behalf or set anyone to undertake their duties. Going against this will lead to the prosecution of the director and the person representing them. The trial may result in over two years of imprisonment or an additional disqualification period.
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What can a disqualified director do?
After being disqualified, a director can work for the company as an employee upon approval by the board of directors. However, such requires the director to prove that they weren’t involved in the company’s wrongdoings. The disqualified director can also run a sole proprietorship business while on the disqualification period and may even get into a partnership that must not be limited. The director can make applications to the court, through a solicitor, to be allowed to continue running as a director. However, such allowance is always limited and gets monitored by the relevant bodies.
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What can one do if they think might face disqualification?
If you are facing disqualification, there are several things you can do. One is taking defense through a lawyer before there is filing for disqualification. The defense should give the reasons why they acted the way they did. If the case is already submitted, one can counter-attack it by issuing a written statement of truth before it gets to trial. One can do this through their attorney.
Director disqualification is not something anyone wants since it diminishes their chances of running a company in the future. Such need to get stopped before it happens. One way of ensuring it doesn’t happen is defending yourself when you get listed for disqualification. We hope this article has given you clues concerning the director’s disqualification process.