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Claims Against Directors: Defending Company Directors

Claims Against Directors: Defending Company Directors

Our expert team in Cardiff regularly advise directors on the available defences if they are accused of failing to fulfil their statutory obligations. Every prosecution brought by Companies House proceeds through Cardiff Magistrates’ Court.

A prosecution can have a significant impact on directors as there is a possibility of a criminal record and potential disqualification from acting as a director in the future.

Companies House can prosecute directors for failures such as:

Annual Accounts.
Directors’ Reports.
Directors’ Remuneration Reports.
Auditors’ Reports.

Blackfords LLP: Specialist Solicitors for Company Director Offences

Our team of experts specialise in defending company directors who have been accused of failing to fulfil their statutory obligations under the Companies Act 2006.

Blackfords LLP regularly act for company directors facing regulatory or criminal investigations and prosecution. We advise directors on the available defences and will engage in communications with Companies House concerning the allegations. Most frequently, these include prosecutions under:

The Theft Act 1968;
The Fraud Act 2006;
The Companies Act 2006;
The Insolvency Act 1986;
and the Bribery Act 2010.

Blackfords LLP provides strategic support to company directors and we have a proven record of successfully defending directors in various legal matters.

Early advice is crucial. Contact our experts for advice and representation as soon as possible through our contact page here. Alternatively, email info@blackfords.com or phone 03330 150 150.

The Duties of a Company Director

In the UK, every company director must follow the obligations of the Companies Act 2006. Any powers that you have as a director must be used in line with the company’s constitution.

The Companies Act 2006 outlines several duties of a company director:

Not to accept benefits from any third parties.
Every decision must be made to promote the success of a company. This is broadly defined as a long-term increase in value, however, it is up to individual directors to choose the path that they believe will benefit the company, employees and the surrounding community.
To only use your power as a director in accordance with the company’s constitution
To use independent judgement.
To exercise reasonable skill, care and diligence.
To declare an interest in a proposed arrangement or transaction. If the transaction has been finalised, the interest should be declared as soon as possible.
To avoid conflicts of interest.

If you are facing prosecution from Companies House, it is vital that you get legal advice as soon as possible. To contact our solicitors, please see our contact page here. Alternatively, email info@blackfords.com or phone 03330 150 150.

Frequently Asked Questions

What Is the Companies Act 2006?

The Companies Act 2006 is the primary legislation that governs companies in the UK. This Act replaced the outdated Companies Act 1985. The key elements of the Act are:

It introduced new provisions for public and private companies.
It codified existing principles, especially those relating to the duties of a director.
It applied a single regime for companies in the UK.
It updated or restated previous provision from the 1985 Act.

Can Company Directors be Prosecuted?

Company directors can be prosecuted for a range of criminal offences, whether this is in relation to their company or a personal action.

Directors of companies may be prosecuted in relation to their business for offences including, corporate crime (such as fraud or bribery), failure to prevent fraud or failure to fulfil statutory obligations outlined in the Companies Act 2006.

What Is Companies House?

Companies House is the executive agency of the Department for Business and Trade. One of its main roles is to incorporate and dissolve limited companies, as well as collect and store information about these businesses.

Company directors need to file certain accounts and documents to Companies House to comply with the law.

Do All Directors Need to Be Listed on Companies House?

Yes, it is a legal requirement for every director of a company to be registered on Companies House.

Are Directors Personally Liable for Company Debt?

In most cases where a limited company becomes insolvent, directors are typically not held personally responsible for any outstanding debts due to ‘limited liability’.

The structure of a limited company protects individuals from personal liability. However, in specific circumstances, directors may be ordered to provide financial compensation to creditors for any losses. This could happen if a director is found guilty of wrongful trading for example.

Other instances of a director being personally liable for company debts can include:

If they have signed a personal guarantee,
If they have an overdrawn director’s loan account,
Debts have accumulated via fraudulent means,
Continuing to pay dividends to shareholders whilst the business is insolvent,
If misfeasance is committed,
Or disposing of company assets at no value or undervalue.

What Should I Do if My Personal Interests Conflict with the Interests of the Company?

A primary duty of a company director is to avoid placing themselves in situations where their personal interests conflict with the interests of the company. Examples of these conflicts could be a director becoming a major supplier, a family member requesting special treatment as a customer, or a director choosing an opportunity based on personal advantages that do not correlate with the interests of the company.

If a director obtains authorisation in advance by other directors or shareholders, this may not be regarded as a breach of their statutory duty.

Am I Liable for Fraudulent Conduct by Fellow Directors?

If there are suspicions that a fellow director is committing fraud, it is likely that the director will not be held liable unless they are involved or knew about the conduct and failed to prevent it.

A director may also be liable if they had a duty to supervise and failed to do so, or if there is negligence or recklessness involved. The law surrounding this can be intricate and complex, so it is essential to get advice from a dedicated solicitor.

Why Might a Director be Disqualified?

If a director does not meet their legal responsibilities, they may be disqualified from their role. This may arise as a consequence of an SFO investigation or for unfit conduct. Unfit conduct may include:

Using company money for their personal benefit
Permitting the company to trade when it cannot pay its debts
Not sending accounts to Companies House
Not meeting HMRC obligations

If a director is disqualified, they may not be a director of a UK-registered company or an overseas company that is tied to the UK or be involved in forming or running a company.