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Misconduct by Companies, Directors and Individuals in Insolvency Situations – How Can I Complain?

David Murray

Partner David Murray, in our Dispute Resolution team, outlines advice from the Insolvency Service on raising a complaint of misconduct against companies, directors and individuals.

Misconduct by companies, directors and individuals is a frequent complaint raised by clients, particularly when a company has entered a form of insolvency or an individual has been made bankrupt. Clients are understandably frustrated by such misconduct, especially where they have suffered as a consequence of the insolvency or bankruptcy and want to take action. Whilst there are a range of options, the government department, the Insolvency Service, has recently updated its website guidance on how and when it can assist.

In simple terms, the Insolvency Service has confirmed;

a. Anyone can report relevant misconduct to it, not only Insolvency Practitioners or lawyers.

b. It will consider relevant complaints regarding both live and insolvent companies together with individuals subject to bankruptcy or debt relief orders.

c. In relation to live companies it will consider relevant complaints such as significant misconduct, fraud, scams or sharp practice in the way the company operates.

d. In relation to insolvent companies it will consider director misconduct including; continuing to trade when insolvent to the detriment of creditors, deliberately depriving creditors of assets, acting fraudulently, not keeping or producing suitable accounting records, not submitting tax returns or paying tax on time, or submitting false information in tax returns, not ensuring the company is run properly and not following other regulatory requirements. If the insolvent company is in compulsory liquidation the complaint should be made to the Official Receiver and all other relevant complaints made in the first instance to the acting Insolvency Practitioner.

e. It will consider complaints regarding directors who are acting in breach of a disqualification order. Individuals are also automatically disqualified from acting as a director if they have been made bankrupt or are subject to disqualification restrictions, orders or undertakings as a consequence of a debt relief order or their bankruptcy.

f. Company names can only be used in certain situations after a company has gone into insolvent liquidation. A director who reuses a company name, without complying with strict statutory obligations, is potentially committing a criminal offence and could become personally liable for certain company debts. The Insolvency Service has confirmed it will investigate complaints made to it of a director wrongfully reusing a company name.

For further information or legal advice, please contact David Murray or a member of our Dispute Resolution team

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.