What is taken into account when considering a UK Disqualification Order?
The actions of directors which are taken into account when deciding whether there are sufficient grounds for a disqualification order or undertaking include:
• Whether any mitigating factors, such as a general economic or industry-specific downturn have contributed to the company’s insolvency, e.g. by affecting its profitability
• Whether the directors have complied with their relevant obligations under the Companies Act, such as keeping accounts and submitting annual returns to Companies House
• Whether the directors have attempted to continue trading or otherwise defraud the company’s creditors while it was insolvent
• Whether the directors made an error of commercial judgement that caused the company’s insolvency, rather than acting as negligent or with misconduct. If a company becomes insolvent then the insolvency practitioner assigned to the case is required to submit a report that details what role, if any, the directors played in the company’s insolvency
If it is decided that there are sufficient grounds to apply for a disqualification order, the director(s) in question might decide to agree to a disqualification undertaking, which avoids court proceedings.
However, if an application to the court for a Company Director Disqualification Order is made, then the court will take a range of factors into account, including the following:
• The evidence as supplied by the Secretary of State (or body, such as the Insolvency Service, acting on their behalf) and which is contained in the application for the Disqualification Order
• The Summary of Truth as supplied by the director(s) explaining their actions
• The testimony of relevant parties, such as company creditors or accountants.
• The defence, if any, put forward by the director(s) lawyer, such as mitigating factors in the company’s insolvency that might result in a shorter vacation period.
• Whether the disqualified director has previously been subject to a Company Director Disqualification Order
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