Following the insolvency of a company the person who administers the assets and liabilities of the company is likely to be a liquidator, administrator, or the Official Receiver. Each of those office holders are duty bound to examine the conduct of the former directors to determine whether they may be unfit to act as Company Directors in the future.
Those office holders are required to file a Report with The Insolvency Service, Disqualification Unit where there is evidence that a director’s conduct may have been unfit. This Report is commonly referred to as a “D-Report”. It is a fact that office holders will file a D-Report as a means to ensure that they can not be criticised in the future for failing to file such a report: they tend to protect their own positions.
A director might suspect that a Liquidator or Administrator may end up in a position where they are about to file a D-Report. Early engagement with the Liquidator or Administrator can be productive but it is an approach that ought to be treated with caution and following advice.
In the majority of cases the first time a former director becomes aware that an investigation is underway is when he/she is contacted by the Insolvency Service and asked to complete a Questionnaire.
It is important for the former director not to waste this valuable opportunity to engage with the Insolvency Service and advance their own version of events. There will be time limits set by the Insolvency Service to receive representations from the former director or their lawyers: those time limits should be adhered to.
This initial period is also an opportunity to shore up evidence from third parties that may include former employees, accountants, financiers, suppliers, customers and former co-directors. The earlier that evidence can be locked down the better. From a strategic position it also prevents the Insolvency Service from securing evidence from the same parties but imposing their own spin.
In summary, when a former director receives a letter from the Insolvency Service telling them that they are investigating their conduct as a director in an insolvent company it is important to do the following –
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