The legal risks associated with directorships are increasing as the UK legal landscape in the sphere of company law develops. Consequently, Director’s duties now extend far beyond those defined in the Companies Act. Today’s business leaders must familiarise themselves with ever changing new legislation such as the Corporate Facilitation of Tax Evasion provisions of the Criminal Finances Act 2017 or the provisions of the Bribery Act 2006 or the Corporate Homicide and Manslaughter Act 2007. The onerous demands of the law and the expanding responsibilities that come with directorships are some of the reasons why directors, may inadvertently or otherwise, find themselves falling foul of the law.
Where director misconduct is alleged business executives will be well advised to seek independent and specialist legal representation. BSQ’s private crime department has extensive experience of representing business executives accused of Director misconduct. We have acted for Company Directors in civil and criminal investigations concerning allegations of fraudulent trading, wrongful trading or acting whilst disqualified and in many internal investigations which have been resolved before civil or criminal proceedings have begun.
Criminal Liability arises for Fraudulent Trading under s213 of the Insolvency Act (1A) and s993 of the Companies Act 2006. To be proved, it must be shown that Directors were either knowingly a party to be carrying on of the business fraudulently or have been actively and dishonestly assisting in or benefiting from the fraudulent conduct. Directors who are shown to possess the dishonest intent to defraud creditors are personally liable to contribute to a company’s assets. Penalties include a fine, imprisonment or both and disqualification from acting as a director for a maximum of 15 years pursuant to Section 10 of the Company Directors Disqualification Act 1986.
Directors could also be held liable for their company’s debts where it can be shown that they knew or ought to have known that the company cannot avoid insolvency and do not act to minimise the potential loss to the company, pursuant to Section 214 of the Insolvency Act.
Company Directors Disqualification
Disqualification orders are made to protect the public from people unfit to be directing the management of a company and to enhance that the level responsibility for those benefiting from limited liability. Disqualification orders can be made against:
· Directors convicted of an indictable offence
· Directors convicted of persistent breaches of corporate legislation
· For engagement in fraudulent activities
· After three 3 convictions for failure to provide the required information to the Registrar of Companies
· For certain breaches of Competition Law
BSQ Fraud specialists Daniel Godden and Roger Sahota recently advised a company director accused of misappropriating company assets. Our client was alerted by a red flag alert from the company’s auditor concerning accounting irregularities. Fearing that an internal investigation would lead to a criminal and civil complaint from his employers we were instructed to approach his employers. Following extensive negotiations, the parties agreed to a civil settlement and non-disclosure agreement.
If you are a company director requiring urgent advice in connection with a civil or criminal enquiry, please call our London offices to arrange an appointment.