How To Avoid Being Disqualified as a Director

Failure to satisfy your responsibilities as a company director exposes you to the risk of disqualification. After disqualification you will no longer be able to serve as a company director,for a given period,without the OK of the relevant court.

The Company Directors Disqualification Act of 1986 sets out the rules of disqualification. In addition to being prohibited from acting as a director,disqualified directors are also restricted from asking another party to manage a company under their instruction.

Disqualification lasts for a 15 year period. Breaching the disqualification rules however,could lead to an extension of this period in addition to a two year jail sentence.

As you can see,a disqualification can have a significant impact on your life; something you will want to avoid at all costs.

Common Reasons For Disqualification

Before looking investigating a director,the Insolvency Service always starts if it finds a valid reason to do so.

Here are some of the common ones:

â ¢ Unfit conduct

â ¢ Failure to maintain proper books

â ¢ Failure to file tax returns on time and/or refusal to pay what is due

â ¢ Utilizing company cash for personal expenses

â ¢ Exercising bias when paying creditors during insolvency

The above is a list of some of the common causes of a disqualification,even though the complete list is longer.

Avoiding Disqualification

Here’s a short list of some of the steps you can take to avoid disqualification.

First Adhere To The Rules

There are many reasons why the Insolvency Service might seek an order to have you disqualified from acting as a director,as shown above. Now that you have a clear idea of what these factors are,sticking to the rules can help you avoid disqualification altogether.

As a director,you must ensure that proper accounting books are maintained,returns are filed and taxes paid within the set deadlines etc.

Have A Good Understanding Of Your Duties As A Director

If you do not fulfil the proper duties as a director your legal duties as a director} amounts to reasons for an investigation into how you are working. As such,it is essential that you familiarize yourself with all the things you have to do,in addition to doing your best to fulfil them.

Remember blaming your failures on ignorance or company officials working under you will not help you avoid disqualification!

Insolvency issues

Continuing to trade after the company is declared insolvent is one sure way to a disqualification. To make sure that your actions do not lead to a disqualification,be sure to seek professional insolvency advice as soon as you find out that the company is facing serious financial problems. This advice should be documented for use in any disqualification proceedings.

If trading continues even after you discover the signs of insolvency,write down the reasons why you are still operating,and keep records of how you are tracking the company’s financial health to make sure that you can identify when to cease operations.

Using the above tips will help you to avoid disqualification. But,if you do end up facing allegations that may lead to a disqualification,these tips can also help you explain why you did what you did to investigators from the Insolvency Service and even a court of law.

For more help please do contact https://www.ndandp.co.uk

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