The Insolvency Service has reminded creditors of a service starting on October 1 that provides compensation when directors are disqualified.
The compensation process is being introduced to provide better financial redress for the loss creditors suffer due to the conduct of disqualified directors.
It means that a disqualified director can in future be required by the court to pay compensation to creditors who have lost out financially for unfit conduct that occurs after October 1 2015.
Financial redress for creditors is just one of various ways in which the company director disqualification process is being strengthened.
From October 1, the law says the secretary of state can seek to have directors of a limited company disqualified if they:
• Have been convicted of a company related offence abroad;
• Influenced or instructed a director to behave in a way that resulted in the disqualification of that director;
• Breach laws or regulations;
• Have a track record of being involved in failing companies.
The nature and extent of any harm and loss caused must also now be considered when deciding if disqualification is appropriate.
The secretary can, for unfit conduct occurring after October 1, also use information from other regulators in disqualification proceedings.
The maximum period of time elapsing between a company being declared insolvent and the secretary of state seeking disqualification proceedings will also increase from two to three years.
These changes follow the passage of the Small Business, Enterprise and Employment Act 2015 which received Royal Assent in March.
By Marcel LeGouais