New rules to tackle disqualified directors
Hot on the heels of rogue directors, the Insolvency Service has been quick to reiterate to creditors the new service starting next month that provides compensation when directors are disqualified.
In July, Financial Saviour reported the news that the number of disqualification and banning orders made against company directors in the UK had risen 83% in the 12 months from March 2014 to March 2015; the highest ever annual figure.
But now, starting from October 1st 2015, all unfit conduct that occurs after this date that has resulted in creditors losing out financially, will undergo a process in which a disqualified director is required by the court to pay compensation.
From 1st October, the law says the secretary of state can seek to have directors of a limited company disqualified if they:
- Breach any laws or regulations
- Have been convicted of a company related offence abroad
- Have influenced/instructed a director to act in such a way that resulted in the disqualification of that director
- Have a track record of involvement in failing companies
The secretary of state must also consider the nature and extent of any harm and loss caused when deciding if disqualification is appropriate, and information from other managers can also be used throughout the disqualification proceedings as part of the process.
The compensation service is essentially being brought into play in order to provide better financial redress for the loss suffered by creditors due to the conduct of disqualified directors, whether this is fraudulent activity, falsification of records, or acting as a director while disqualified. It is one of the many ways that this whole disqualification process is being strengthened.
Are you concerned about how the new rules may affect you, as a creditor, or your business? Get in touch with Financial Saviour today and our team of licensed insolvency practitioners will take time to understand your situation and provide you with leading financial advice.