Directors' Disqualification for Breach of Duty

Article

23 September, 2014

A Manchester based cleaning and corporate restructuring company, JLK Partnerships Limited ('the Company'), went into liquidation in 2012 owing £291,535 to creditors.

Following an investigation by the Insolvency Service, two of the directors of the Company were disqualified for a total of 10 years. In particular, Stuart Delmonte, was disqualified for 6 years for failing to maintain proper accounting records and Kirsty Englander was disqualified for 4 years for failing to exercise a proper level of control, expected of a director, over the affairs of the Company.

Both directors have given undertakings to the Secretary of State for Business, Innovation and Skills not to act as directors or in any way manage or control companies for the duration of their bans.

The duties of directors are set out in statute; they are wide and all-encompassing. They range from the general duty to promote the success of the company to the more specific duty to maintain proper accounting records; the duty which this case relates to.

Where directors breach their duties they can face civil claims and / or prosecution for criminal offences. Disqualification is just one of many possible sanctions.

Where a director is disqualified he cannot, without leave of the Court, be:

- A director of a company
- A liquidator or administrator of a company
- A receiver or manager of a company's property
- Concerned in any way, whether directly or indirectly, in the promotion, formation or management of a company

For the period of time specified in the Court Order.

If a director breaches a Disqualification Order he could face civil and / or criminal liability. Sanction under criminal law for breach of a Disqualification Order can include imprisonment for up to 2 years and an unlimited fine. The director can also become personally responsible for debts of the company.

It is therefore crucial for directors to know exactly what their duties are, and to comply with them, as well as for Insolvency Practitioners to know what areas to investigate to ascertain whether there has been compliance.

Lucie Cocker specialises in Corporate Insolvency Litigation and advises both directors and Insolvency Practitioners in relation to these types of issues. For advice or assistance in relation to directors' liabilities or any other insolvency matters please do not hesitate to contact the Business Law team by email or on 0800 689 0831.

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