Tuesday, 27 October 2015

What is the Law in Your Life?

5 things you should know about the changes to the directors' disqualification regime.

1.  The Small Business, Enterprise and Employment Act 2015 ("the Act") has introduced a number of changes to the law relating to directors' disqualification. This blog post addresses some of the key changes.

2.  The Act introduces two new grounds for disqualification as a director: (1) proceedings will be possible against a director on the basis that he has been convicted overseas of certain offences connected with establishing and running companies; and (2) where a director has been disqualified in circumstances where his conduct makes him unfit to be involved in the management of a company and that director was acting on the directions or instructions of a third party, it will be possible to bring disqualification proceedings against the third party exerting that influence.

3.  There has been an expansion of the matters that a court must take into account when determining an application for disqualification, including a director's track record, the nature and extent of any loss or harm caused and their activities overseas. When determining whether a person's conduct as a director of a company makes them unfit to be involved in the management of a company, conduct as a director of any overseas company must now be considered.

4.  Where a company becomes insolvent: (1) insolvency practitioners will be obliged to report to the Secretary of State on the conduct of every director of the company at the date of the insolvency (and during the three previous years) and in that report, describe any conduct which may assist the Secretary of State in deciding whether to bring disqualification proceedings - previously, insolvency practitioners were only required to report if they felt that the director's conduct showed he was unfit to be involved in the management of a company; (2) the length of time during which disqualification proceedings can be brought against a director will be extended from two years to three years after the date on which the company becomes insolvent; and (3) courts will have the ability to order a person subject to a disqualification order to make a payment for the benefit of one or more creditors of the insolvent company, where the conduct of that person which led to his disqualification has caused the creditor(s) to suffer loss.

5.  Whilst the majority of the changes set out above were brought into effect on 1 October 2015, the changes relating to the reporting obligations of insolvency practitioners were not and, at present, there is no indication as to when these changes will be brought into force