Friday, 1 November 2019

Simple mistakes have consequences

Company directors have been warned they could face disqualification for even the simplest of mistakes.

Andrew Oranjuik, of Martin-Kaye Solicitors in Telford, Shrewsbury and Wolverhampton, said it would be easy to assume that directors would only be disqualified for major failings like corporate fraud.

“But in fact, you could face disqualification in circumstances that are far less dramatic – even down to mishandling the paperwork you’re required to keep.”

Mr Oranjuik said there was a wide range of issues that could lead to a director being disqualified, from failing to keep proper accounting records to employing illegal workers and being involved in banking scams.

“Often the possibility of disqualification comes to light if a company is being investigated in an insolvency case, but it can also come from other investigations and court proceedings, including a breach of directors’ duties enquiry or competition law.”

Mr Oranjuik said surprisingly the most common reason for disqualification was failing to keep accounting records, with the situation often discovered when insolvency experts investigate why a company had gone bust.

“If a director’s actions are deemed to have been inappropriate leading up to their company’s insolvency, they can be disqualified – this covers a whole host of actions including allowing the company to trade while insolvent, using its money or assets for your own benefit, and failing to keep proper records.

“You can also be disqualified if you cause your company to break the law whether the company is insolvent or not, for occasions like data breaches and consumer scams.”

Mr Oranjuik said if disqualified, a director is banned from being a company director and from taking part in the promotion, formation or management of a company.

“This means you could be employed by a company, but you must be careful not to get involved in management – so no hiring of staff or making financial decisions.

“In some cases, the court can grant a director permission to act despite being disqualified, but this will be tightly controlled and usually only to allow a director to stay on just to wind their company up.

“It’s easy to think that small issues will not lead to serious consequences, but that’s just not the case – as a director you have responsibilities on all levels and it’s important to realise how seriously you need to take them.”