Articles and Publications
Are You Fit To Be a Director?
19/Aug/2004
It does not matter that it may be the first time you have been a director and that you don’t know what your obligations as a director are. That is no excuse.
It does not matter whether or not Companies House have you registered as a director. If you are in control of a company and are doing the job as a director then the DTI will consider for these purposes that you are a director.
The law imposes certain obligations on directors. If these obligations are not complied with then the DTI can make an application for your disqualification.
Your obligations as a director include:
Unfit behaviour includes:
If the DTI brings an action against you for disqualification and they succeed an order will be made against you and you will be disqualified from acting as a director of any company for a certain period of time. The length of the disqualification period depends on the severity of the case; the minimum is two years and the maximum is fifteen.
Whilst the order is in force you will be prevented from being involved in any way in the promotion, formation or management of any company. You may also be ordered to pay the costs of the proceedings which can be substantial.
The matter can be dealt with by the giving of an undertaking, (i.e. a promise) not to act as a director for a specified period of time. The effect is the same as a court order but in exchange for this the DTI will restrict its costs. Either way if an order is made or an undertaking given and you breach it you will face criminal sanctions.
The best way to avoid being in this situation is to be a responsible and "fit" director.
If you require any further information or any insolvency advice then do not hesitate to contact any member of the Insolvency team.
It does not matter whether or not Companies House have you registered as a director. If you are in control of a company and are doing the job as a director then the DTI will consider for these purposes that you are a director.
The law imposes certain obligations on directors. If these obligations are not complied with then the DTI can make an application for your disqualification.
Your obligations as a director include:
- To pay Crown Debts when they fall due
- To complete books and records and file these at Companies House annually
- To complete VAT returns every quarter
Unfit behaviour includes:
- Continuing to trade when the company can not afford to pay its’ debts and incurring further debts which the company will not be able to pay
- If the company goes "bust" failing to cooperate with the liquidator
- Fraudulent trading, misapplication or retention of company money and/or property
- Misuse of the company’s bank accounts, (i.e. deliberately writing cheques knowing they will bounce)
- Taking excessive remuneration
- Any breaches of your obligations as a director
If the DTI brings an action against you for disqualification and they succeed an order will be made against you and you will be disqualified from acting as a director of any company for a certain period of time. The length of the disqualification period depends on the severity of the case; the minimum is two years and the maximum is fifteen.
Whilst the order is in force you will be prevented from being involved in any way in the promotion, formation or management of any company. You may also be ordered to pay the costs of the proceedings which can be substantial.
The matter can be dealt with by the giving of an undertaking, (i.e. a promise) not to act as a director for a specified period of time. The effect is the same as a court order but in exchange for this the DTI will restrict its costs. Either way if an order is made or an undertaking given and you breach it you will face criminal sanctions.
The best way to avoid being in this situation is to be a responsible and "fit" director.
If you require any further information or any insolvency advice then do not hesitate to contact any member of the Insolvency team.
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