Directors have a responsibility to maintain, preserve and deliver up records that are adequate to explain the financial position of their company. If they fail to do so, they run the risk of being disqualified from acting as a director.
In a recent Insolvency Service investigation, a director was banned for seven years. His transgressions are illuminating. They included:
- He was unable to explain payments taken for his personal benefit amounting to £35,500.
- He was unable to explain the reasons for 83 cheque payments totalling £30,734.
- He authorised payments of almost £100,000 that were made when the company was insolvent, or caused it to become insolvent.
A disqualification order has the effect that without specific permission of a court, a person with a disqualification cannot:
- act as a director of a company
- take part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership
- be a receiver of a company’s property