Once a company has entered into formal insolvency proceedings the official receiver, liquidator, administrator or receiver is required to submit a report on the conduct of all directors in office during the previous three trading years.
This is sent to the Insolvency Service, which acts on behalf of the Secretary of State for Business, Energy and Industrial Strategy.
The office holder is required to report whether in their judgement, the behaviour of any of the directors appears to satisfy the conditions for disqualification.
The Insolvency Service has the power to conduct investigations in companies and limited liability partnerships.
This applies if those entities are trading or have ceased trading, without entering into insolvency proceedings.
It may also receive information that suggests serious corporate abuse has taken place, either from members of the public, employees or official regulators.
Based on the information it receives, the Insolvency Service will decide whether it’s in the public interest to investigate further and, ultimately, whether or not to seek a disqualification order.
At this stage, the Insolvency Service may contact the director to request a full explanation of the situation and will formally ask for further information to be supplied to help conclude its investigation.
When a final decision has been reached to seek a disqualification order, the director will be notified by post.
If the director chooses not to respond, or a disqualification undertaking cannot be agreed, then court proceedings will commence. At this stage, a formal notice of the proceedings will be served on the director.