I meet a lot of Directors who are surprised to learn that their conduct will be investigated on the back of their Directorship of a company, that has entered into Insolvency.
Insolvency Practitioners are legally required to submit a completed questionnaire to the Department for Business, Energy and Industrial Strategy. This forms a commentary on Directors’ Conduct, which the Department uses to decide whether further investigation is appropriate.
Considering that a negative report could lead to Directors’ Disqualification of up to 15 years, I’ve put together these tips for you in the spirit of maintaining good conduct.
Keep meticulous records
Finances and company decisions should be recorded carefully and in detail from the first day of trading to the last. During Insolvency, investigative bodies want to understand your route to business failure and clear records will assist you in your explanations.
On a side note, detailed, accurate records often prevent investigations in the first place.
Co-operate with Insolvency Practitioners
I can’t stress this enough. If you’ve entered into Insolvency, work with the appointed Insolvency Practitioner. That means making information available as needed, in a timely and ordered fashion. (Use your accountants and any legal advisers to help in supplying accurate information, if necessary.)
Co-operate with Creditors
You may be required to attend a meeting with your company’s creditors, depending on the type of insolvency process. If you are not entitled to be at a meeting, or you are asked to leave on sound grounds, do so.
Take care with your responses to Creditors of course – you may wish to seek legal advice beforehand. You’ll be questioned (potentially quite rigorously) and it goes without saying that being open and neutral in your response is preferential.
Take care with the questionnaire
During Insolvency, you’ll be asked to complete a questionnaire – the questions aim to establish the reasons for business failure and may also be used to assess any wrongdoing. I’d always advise working with your accountant and/or lawyer for accuracy, which protects you and is most helpful during insolvency proceedings.
You’ll need to complete the questionnaire if you’re a registered Director with Companies House, use ‘Director’ in your business title, or act as a Director in your work for the company.
Pay attention to the submission deadline, too. Legally, you must assist Insolvency Practitioners – meeting deadlines is a logical part of this.
Of course, your attention to Directors’ Conduct should start from the moment you act as a Director, not only when questioned. It’s also worth noting that both the public and creditors can report any concerns about your conduct at any stage, Insolvent or not.
If you’d like advice on Directors’ Conduct, or Insolvency proceedings, please do not hesitate to contact the team at Dunion & Co., for a free initial consultation.