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New rules for insolvency office-holders

At present insolvency office-holders are only required to submit reports about directors to the Secretary of State if they consider that a director’s conduct meets the conditions for a disqualification order.

Sections 6 and 7 of the Company Directors Disqualification Act 1986 (“CDDA 1986”) set out the conditions for a disqualification order. These sections provide that liquidators, administrators and administrative receivers are only required to submit a report to the Secretary of State where a director’s conduct makes him unfit to be concerned in the management of a company (whether the director’s conduct is taken alone or taken together with his conduct of any other company or companies). If the office-holder considers that the director’s conduct makes him unfit to be involved in the management of a company in the future, a report has to be made to the Secretary of State within six months of the date when the insolvency starts.

On 9 March 2016 new regulations were made to give effect to a new Section 7A of the CDDA 1986. The new section 7A requires liquidators, administrators and administrative receivers to submit a report to the Secretary of State on the conduct of all directors of insolvent companies within a period of 3 months from the date when the insolvency starts. The new rules apply to insolvencies starting on or after 6 April 2016.

Failure to comply with the new rules can result in criminal sanctions, so it is important that office-holders comply with the new reporting requirements for insolvencies starting on or after 6 April 2016. Office-holders will also be able to electronically file reports on directors when the new rules come into force.

If you have any queries about the new reporting requirements, the conduct of a director or disqualification orders generally, please contact Rachel Brown in our Litigation and Dispute Resolution team on 020 7216 5562.