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Advise you about a Compensation Order connected with a company director disqualification order

If you are facing an investigation by the Insolvency Service to disqualify you as a director of a company there are a range of factors you will need to consider including the prospects of financial claims being made against you.  Those claims may be brought about by the liquidator of the insolvent company to which the allegations of unfit conduct relate or they may be brought by the Insolvency Service under powers which were acquired in 2015.

An amendment to the Company Directors Disqualification Act 1986 conferred upon the insolvency service powers to obtain a compensation order against the director of an insolvent company who is then subject to a disqualification order or undertaking. 

You will need to take advice from specialist insolvency lawyers who have years of experience in dealing with the financial aspects and consequences of directors disqualification.

Section 15A (1) of the Company Directors Disqualification Act 1986 says the following:

The court may make a compensation order against a person on the application of the Secretary of State if it is satisfied that the conditions mentioned in subsection (3) are met.

The relevant conditions are the following:

The conditions are that—

  1. the person is subject to a disqualification order or disqualification undertaking under this Act, and

  2. conduct for which the person is subject to the order or undertaking has caused loss to one or more creditors of an insolvent company of which the person has at any time been a director.

The Insolvency Service now have a dedicated unit established within that government agency to pursue compensation orders against people who are subject to disqualification orders or undertakings.   Therefore, whilst the potential consequences of entering  into a disqualification order were always relevant when considering what course of action a liquidator may take the position of the Insolvency Service will now need to be ascertained in almost every single case.

Your directors disqualification lawyers will need to ensure that the assurance obtained from the Insolvency Service promising not to pursue a Compensation Order arising out of a disqualification order or undertaking will be enforceable. 

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