Company Directors

The legal risks associated with directorships are increasing as UK company law develops. Consequently, Director’s duties now extend far beyond those defined in the Companies Act.

Today’s business leaders must familiarise themselves with ever-changing new legislation such as the Corporate Facilitation of Tax Evasion provisions of the Criminal Finances Act 2017 or the provisions of the Bribery Act 2006 or the Corporate Homicide and Manslaughter Act 2007. The onerous demands of the law and the expanding responsibilities that come with directorships are some of the reasons why directors may, inadvertently or otherwise, find themselves falling foul of the law.

Where director misconduct is alleged business executives will be well advised to seek independent and specialist legal representation. BSQ’s private crime department has extensive experience of representing business executives accused of Director misconduct.

We have acted for Company Directors in civil and criminal investigations concerning allegations of fraudulent trading, wrongful trading or acting whilst disqualified and in many internal investigations which have been resolved before civil or criminal proceedings have begun.

Wrongful Trading

Directors could also be held liable for their company’s debts where it can be shown that they knew or ought to have known that the company cannot avoid insolvency and do not act to minimise the potential loss to the company, pursuant to Section 214 of the Insolvency Act.

Fraudulent Trading

Criminal Liability arises for Fraudulent Trading under s213 of the Insolvency Act (1A) and s993 of the Companies Act 2006. To be proved, it must be shown that Directors were either knowingly a party to be carrying on of the business fraudulently or have been actively and dishonestly assisting in or benefiting from the fraudulent conduct.

Directors who are shown to possess the dishonest intent to defraud creditors are personally liable to contribute to a company’s assets.  Penalties include a fine, imprisonment or both and disqualification from acting as a director for a maximum of 15 years pursuant to Section 10 of the Company Directors Disqualification Act 1986.

Disqualification orders are made to protect the public from people unfit to be directing the management of a company and to enhance that the level responsibility for those benefiting from limited liability.  Disqualification orders can be made against:

• Directors convicted of an indictable offence

• Directors convicted of persistent breaches of corporate legislation

• For engagement in fraudulent activities

• After three 3 convictions for failure to provide the required information to the Registrar of Companies

• For certain breaches of Competition Law

Client A was the owner and MD of a company providing training services that was the subject of parallel regulatory and police investigations. His original lawyers had not scrutinised the conduct of the police during the course of the investigation. On review, BSQ advised that the client and other accused had grounds to apply to quash the search wants obtained by the police and to challenge various cash detention orders. Judicial review proceedings commenced and were later settled with the authorities agreeing to quash the search warrants and pay compensation to each client. The cash seizure proceedings were also settled with in excess of £200,000 in sum total returned to our clients. The BSQ partner instructed was Roger Sahota.

Client B was the Director of a company providing BSL services to the public sector which received Access to Work Funding. The DWP and Police executed search warrants against the business premises and obtained a Restraint Order against both the company and the director which placed the company at threat of liquidation. BSQ partner Daniel Godden successfully discharged the restraint order, quashed the warrant by way of judicial review, obtained the return of all items seized along with costs and compensation.

Client C was the former MD of the UK subsidiary of US based company. It was alleged that C had defrauded his employers by submitting and approving for payment fraudulent invoices in order to enrich himself. BSQ partner Daniel Godden was instructed. No criminal complaint was made against C following negotiation between BSQ and lawyers representing the US parent resulted in a settlement in terms favourable to C.