Call 0800 644 6080 (From Mobile 0333 009 0010)
Call 0800 644 6080 (From Mobile 0333 009 0010)

Directors Disqualification During Insolvency - How to avoid it?

Licensed UK Insolvency Practitioners FREE Meeting for Company Directors We can help with serious company debts, HMRC and creditor pressure, VAT/PAYE/Tax arrears, cashflow problems and raising finance.

Avoiding Directors Disqualification


A company is considered to be insolvent when it cannot pay bills on time and/or its debts are greater than the combined value of all its assets.

According to UK law, the directors of an insolvent business are required to act in the best interest of the company’s creditors as a whole. Failure to do so could result in accusation of wrongful or fraudulent trading after a liquidation, administration, or receivership procedure.

Any director found guilty of wrongful trading could face financial penalties, being ordered to contribute personally to the company's assets, and/or being disqualified from acting as the director of any limited liability company in the UK for a period of 15 years.

Any one of the company’s creditors/contributories can file a petition to the Court requesting a directors’ disqualification order, which would disqualify the individual(s) in question from acting as a director for up to 15 years. Keep in mind the court will only grant a disqualification order if there is evidence of wrongful/fraudulent trading or misconduct.

It should be noted that not all liquidations end with directors’ disqualification. In fact, it is a relatively rare occurrence, as directors are only disqualified in about 5% of all insolvency cases.

The Department of Business Innovation and Skills (DBIS) examines various aspects of performance when determining whether a director should be disqualified for unfit behaviour. Heed the following tips to be sure you’ll pass the DBIS checklist and avoid directors’ disqualification during insolvency:
  • Practice Responsible Accounting and Reporting – It’s always good to keep thorough documentation of all expenditure and income, as this information could protect you from being accused of wrongful trading.
  • Remember Companies House – Submit annual accounts and reports to Companies House on time.
  • Communicate and Negotiate with Creditors – Failure to respond to a creditor or comply with their requests could be seen as an act of misconduct. Be sure to maintain continual communication with creditors, and consider attempting an agreement through a company voluntary arrangement (CVA). A professionally drafted and proposed CVA will provide a higher chance of success than independent negotiations over the phone or via email.
  • Cease Trading During Insolvency- If you continue to conduct business knowing that there is no realistic prospect of being able to repay debts then you’re putting yourself in the position to be disqualified. In particular, DBIS will be looking for excessive salaries and drawings taken out while the company was insolvent.
  • Seek Guidance - Discuss your case and review options with a licensed Insolvency Practitioner as soon as possible. 

If your company is going out of business and you’re concerned about the possibility of being disqualified as a director, feel free to contact us with your questions. If you’d rather have a conversation over the phone you can call our directors’ advice hotline (0800 231 6040) between the hours of 8am and 10pm, 7 days a week.

It is very good news that HMC Health & Beauty has been acquired as a going concern by a purchaser with a strong track record in the sector. Not only does it mean that the business will continue to trade, safeguarding the livelihoods of the staff, but it also puts it on a more secure footing for the future.
Read the Case Study   View all Case Studies

Contact our team

Jonathan Munnery
Andrew MacKenzie
Julie Palmer
Thomas Mckay
Keith Tully
Processing...
or find your nearest office

If You've Enjoyed This Article or Found it Interesting, 'Please Share it' With the Rest of the World!

Related News


What is a Seized Goods Letter?

Friday 2nd December, 2016 Written by Keith Tully

If your business goods have been seized by a government agency such as HMRC or Border Force, read our guide on seized goods letters for company directors.

Learn More…

Construction sector insolvencies: help and advice for firms in financial distress

Thursday 25th August, 2016 Written by Keith Tully

The construction industry remains in crisis this summer as the number of insolvencies continues at the highest level of all UK sectors.

Learn More…

Which UK industry sectors are experiencing the most insolvency appointments?

Thursday 25th August, 2016 Written by Keith Tully

Figures from the Insolvency Service show that in 2015 the construction industry suffered the highest number of insolvencies in England and Wales, with the wholesale and retail trade coming a close second.

Learn More…
Every day we help companies just like yours turn things around against seemingly impossible odds, regardless of your situation we can help. Find your nearest office today.
Menu