Monday, 14 October 2013

Common Mistakes in Director Disqualification Claims - Running a Company “behind the scenes”

Some directors believe that they can still run a company despite being disqualified – normally by appointing other directors in their place whilst controlling the company in the background.  This is termed a “shadow  director” and the Insolvency Service and other authorities are well aware of this practice.
These directors fail to realise that being in breach of a disqualification order is a serious offence.  It is a criminal offence.  It can lead to a fine or imprisonment.  It can also lead to that individual director being responsible for the debts of the company going forward (or at least incurred during the period whilst s/he acted as a shadow director). 
The Secretary of State does check whether disqualified directors are acting in breach of the disqualification order and does receive reports from various sources who may be aware of the disqualification order (as it is publicly available information). Rather than risk the draconian sanctions, a director should take advice on his/her options such as seeking permission to remain a director despite the disqualification order having been made (or threatened).
Some directors believe that they can control the company despite disqualification due to the fact that they are the majority shareholder.  This is not permissible.  If a director tries to manage the business in the guise as a shareholder he/she will be acting in breach of the disqualification order with all the serious consequences this can carry and will effectively be acting as a shadow director. Do not risk it.