Company liquidation

If you are a director of a company that becomes insolvent and there is evidence of unfit conduct by you, the Insolvency Service can apply to the court to make an order disqualifying you from acting as a director for between two and 15 years.

Disqualification order

A disqualification order can be made against a director for such unfit conduct as:

• continuing to trade at the expense of creditors when the company was insolvent
• failing to keep proper accounting records
• failing to submit tax returns or pay tax due
• not preparing and filing accounts or not sending returns to Companies House
• failure to co-operate with the official receiver/insolvency practitioner

The effects of disqualification

A disqualification order or undertaking will prevent you from:

• acting as a company director
• being involved with the formation, management or running of a new company
• acting as a receiver of a company's property

Disqualification proceedings

The Insolvency Service has three years to apply for disqualification starting from the official end of the company which can be from the date of the:

• winding-up order (compulsory liquidation)
• voluntary liquidation
• administrative receivership
• administration

This period may be extended at the discretion of the court.

See the Department for the Economy (DfE) guidance on directors disqualification.

Disqualification undertakings

If you are a director who is the subject of intended disqualification proceedings, you can offer a disqualification undertaking to the department, undertaking not to be a director for an agreed period. A disqualification undertaking has the same effect in law as a disqualification order, but does not involve the courts.

Scope of disqualification

The ban on being a director applies to all registered and unregistered companies formed in Northern Ireland and Great Britain. The ban also applies to foreign companies that are registered in the UK and to:

• building societies
• incorporated friendly societies
• NHS Foundation Trusts

You will also be barred from holding other offices.

Criminal proceedings for breaches of a disqualification order

It is a criminal offence to breach a director disqualification order or undertaking, without permission from the court. The penalties range from a fine to up to two years in prison.

If you breach your disqualification order or undertaking, you will be personally liable for the company's debts incurred during the breach. The same applies to anyone involved in the management of the company who carries out your instructions knowing that you are disqualified.