Director disqualification – extension of limitation period – COMMENCEMENT ORDER TO BE ANNOUNCED
This is part of a series of posts on the Small Business, Enterprise & Employment Bill that has now come into force on 26 March 2015 following the grant of Royal Assent and is now the Small Business, Enterprise and Employment Act 2015 (“the Act”).
This series of posts is intended to update the readers of the key changes, which should radically transform the transparency of the marketplace as regards the operation, control, ownership and risk associated to limited companies in the UK.
We have not addressed all of the issues described in our previous posts, to avoid duplication, but would welcome any queries from the reader in this respect.
The commencement of these changes is different dependant on which part of the Act is being reviewed (Section 164 of the Act defines commencement) and we have highlighted below the relevant commencement dates. Where we below stated “to be announced” this means it has not yet come into force and will commence upon the making of a Commencement Order.
The changes as set out below will be extremely important to all directors, companies and individuals with business in the future and it cannot be emphasised too strongly how important it is that you are prepared for these proposed changes. At Francis Wilks & Jones we can advise on all matters subject to these posts.
Director disqualification claims previously could only be brought against directors within a period of 2 years from the date of insolvency.
However, this limitation period is now extended to three years and, as a result of the shortening of the report timetable for liquidators/administrators to provide their reports on the directors’ conduct, there is a much greater period of time during which investigations into conduct of directors of insolvent companies can continue.
As stated above, this widening of the liability of directors includes shadow directors, and will certainly have consequences for non-executive directors who historically considered they were exempt from such risk.
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 will go on even longer with the ongoing threat of a disqualification claim hanging above directors (plus compensation orders which will further extend this threat – see the next blog).
It is always recommended that former directors confront any initial enquiries they received early on rather than ignoring them and these changes, once implemented, will make this even more important. Please contact Francis Wilks & Jones should you require any further assistance with regard to these matters.
