Tuesday, 10 February 2015

Director Disqualification – Extension Of Limitation Period

This is part of a series of blogs on the Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015.

Director disqualification claims currently can only be brought against directors within a period of 2 years from the date of insolvency. However, this limitation period is further shortened by the fact that the D Report filed with the Secretary of State by Liquidators and Administrators is not due until 6 months after the commencement of insolvency, and is often prepared towards the end of that period as it takes some time to ascertain whether there is anything to report

This often leaves a very short period for the Insolvency Service, which is an executive agency of DBIS and acts on behalf of the Secretary of State, to review the matters, investigate any misconduct by directors, obtain approval to commence proceedings, draft evidence and negotiate with directors before the limitation period expires.

I also refer to my previous blog on the amendments to the deadline for submission of a D Report, which is proposed to be shortened to 3 months. Additionally, Section 96 of the Bill now also proposes that the limitation period be extended from 2 to 3 years (although Vince Cable had proposed 5 years in his initial discussion paper published in July 2014).
The extension of this investigation period will obviously mean that the Secretary of State will be able to put together a stronger case in future disqualification claims, which are issued to protect the public interest. Conversely, this will leave the potential consequences of having been a director of an insolvent company to last longer with the ongoing threat of a disqualification claim hanging above directors.
It is always recommended by us that former directors confront any initial enquiries early on rather than ignoring them and the above changes will make this even more important. Please contact Francis Wilks & Jones should you require any further assistance with regard to these matters.