Director Investigation Solicitors

If you are the subject of a director investigation, it is crucial to seek legal advice in order to ensure the best possible outcome and minimise the chance of directors’ disqualification or of legal proceedings being launched against you. It is common for the wind-down of a business to be mishandled in any number of ways, and having expert legal practitioners at your side can help to ensure the chances of accidental wrongdoing are kept to a minimum, lessening the chance of a successful director investigation against you.

If you are considering insolvency proceedings for your business you should obtain specialist legal assistance as early in the process as possible. At Lawtons we can guide you through every step of this complex procedure, ensuring that you and your business colleagues follow every regulation to the letter and are able to make a success of your future ventures without any reputational damage. Contact us today by calling 0333 577 0522 for expert advice on insolvency and director investigations from our specialist lawyers. 

What is a director investigation?

If a company goes into insolvency proceedings such as administration or liquidation, the company in question is legally required to launch an investigation into the cause of the insolvency. In many cases this will lead to one or more company directors being personally investigated for their actions leading up to the downfall of the company, and may also lead to disqualification or criminal prosecution. 

What offences can cause a director investigation to be launched?

There are several main reasons why a company director may be placed under investigation following the start of insolvency proceedings. The most common include:

  • Wrongful trading where a company continues to trade with no prospect of returning to solvency. Directors have an obligation to try to limit losses to creditors in the event of insolvency, and while failure to do so many be deemed as deliberate, it can also occur where a company is waiting for a wind-up petition to be issued against it (which often makes voluntary liquidation a better and more legally sound option)
  • Preference payments where particular creditors are given preferential treatment over others – such as family members, other directors or shareholders, or suppliers the director in question may intend to use when starting a new company
  • Transaction at undervalue where a company asset is either sold or given away at much less than its actual value, to stop assets being stripped at the point of insolvency. This can include cash taken from the company without cause. If transferring assets out of a company ahead of insolvency, it is crucial to obtain professional legal advice
  • An overdrawn directors’ loan account, which may be a part of efficient tax planning prior to liquidation but becomes a problem upon liquidation if the company does not have sufficient reserves to declare dividends

What can happen if a directors investigation uncovers wrongdoing?

Directors who are the subject of an investigation may be required to make a financial contribution to the insolvent company, but the investigating body may also decide it is appropriate to order disqualification of the director in question. Directors who are the subject of disqualification orders cannot act as a company director elsewhere for a period of anywhere between 2 and 15 years depending on the nature of the wrongdoing and the specifics of the case.

In more serious cases, it may be deemed necessary to launch criminal proceedings against the director if it is found that a form of business crime has been committed. Some business crimes can lead to prison sentences being imposed.

Speak to us about director investigations

If you are the subject of a director investigation or are concerned that the wind-down of your company may not be following all legal requirements, getting expert advice at the earliest possible stage can make a big difference to the future of your career. Do not hesitate to call us on 0333 577 0522.

 

FAQs about Director Investigations

What is the difference between wrongful trading and fraudulent trading?

Fraudulent trading is a criminal offence as opposed to a civil offence, and involves intent to cause creditors a loss by trading. Wrongful trading is not a crime in itself.

Does a director investigation mean a criminal offence is being investigated?

In most cases a director investigation is simply a standard part of insolvency proceedings, and most wrongdoing in such circumstances tends to be considered a civil matter. It is more common for directors’ disqualification to occur than for criminal proceedings to be launched.

Is insolvency the same as bankruptcy?

Insolvency is where a company or individual is unable to pay their debts, and generally triggers insolvency proceedings such as administration. Bankruptcy is the legal process that takes place after insolvency has been declared, but the term refers to an individual rather than a company.