The next phase of the Small Business, Enterprise and Employment Act comes into effect today. The new provisions concern directors’ disqualification and creditor compensation.
The aims of the new provisions are to:
- Modernise and strengthen the director disqualification regime to give the business community and consumers confidence that wrongdoers will be barred as directors
- Simplify the procedure whereby insolvency practitioners (liquidators, administrators, administrative receivers) and official receivers report on the conduct of the directors of insolvent companies
- Strengthen mechanisms that compensate creditors for director misconduct .
The new measures will strengthen the Government’s power to disqualify limited company directors in certain circumstances. Circumstances such as:
- If a director has committed a company-related offence abroad
- If a director has influenced or instructed another director to behave in a way that has resulted in the disqualification of that director
- If they have been involved in a string of failed companies
- If the director has breached law and regulations.
Under the new provisions disqualified directors may be made by the Court to compensate creditors who have suffered a loss as a result of their conduct.
It is also worth noting that the nature and extent of the harm caused will be looked at when deciding upon whether disqualification is appropriate. A further change that will come into effect is the increase in time between a company being declared insolvent and the Government seeking disqualification from two years to three.
 Department for Business, Innovation and Skills – Small Business, Enterprise and Employment Act: Directors’ Disqualification and Creditor Compensation fact sheet