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Director disqualification is on the increase, Insolvency Service adopting tough approach

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The Insolvency Service reports a 25% increase on the number of directors who have been disqualified since last year in England, Scotland and Wales. This figure comes following a call from the Business Secretary, Vince Cable, for tougher laws to crack down on ‘dodgy directors’.

Figures obtained from the Insolvency Service show that in 2013/2014, 1,208 Directors were disqualified compared to 969 in 2012/2013. This last year also saw a 19% rise in disqualification proceedings issued by the Insolvency Service.

Disqualified directors face a lengthy ban if they are found to have breached their duties. Depending upon the severity of the offence, directors may face a ban of up to 15 years. Disqualification bars individuals from being a company director, receiving company property and being concerned with the formation, running and marketing of a company or a limited liability partnership.

Directors need to be aware of the duties that they have and be clear about the effects that being in breach of these duties may have on them personally. This includes the risk of personal liability for the director. Stephensons can help directors understand and comply with their duties in relation to the role of director.

If you are facing an investigation by the Insolvency Service and the possibility of disqualification, specialist advice should be obtained as soon as possible.

By Nicola Whittle, associate solicitor in the commercial litigation department