Directors who are under investigation and Company Directors Disqualification Act 1986 – Section 447 Companies Act 2006
Investigations under section 447 are carried out where, for example, there are grounds for suspicion of fraud, misfeasance, misconduct, conduct unfairly prejudicial to shareholders or of failure to supply shareholders with information they may reasonably expect.
First and foremost Individual Directors and ex-Directors should retain records of potentially responsive insurance cover – most likely Directors and Officers (‘D&O’) cover. If such insurance is in place, then it often responds to section 447 investigations.
Preparing for the interview
The Director(s) will be interviewed (often more than once) by the Investigator as the investigation progresses. It is vital that the company and its Directors are best represented in such meetings. It is important to try and establish a rapport with the Investigator to avoid the risk of misunderstanding or of the Director being misled, whether inadvertently or otherwise.
Interventions in such interviews/meetings, on behalf of the Director, are vitally important. Such interventions ensure (for example) that there is clarity as to whether any criminal proceedings are in contemplation. The presence of a full Legal Team (perhaps including Counsel) on behalf of the company and its Director(s), is likely to act as a restraining influence on the Investigator, discouraging the Investigator from exceeding his/her remit and powers or otherwise acting improperly or unfairly.
It is vital that the Director is fully represented when meeting the Investigator, to ensure both that the Director complies with his statutory obligations under section 447 and so that the Director is protected to the maximum extent properly permissible in law against any possible repercussions.
Ensuring compliance with the provision of information and documents
As explained above, the repercussions for non-compliance are potentially very extensive and very serious. It is important that such legal representation should include both attendance in Director interviews and a supervisory watch over all documents and information disclosed.
That ensures proper and lawful compliance and allows us to guard against any difficulties which might arise from the release of documents. Experience counts for everything in such cases.
Communicating with the Insolvency Service on the Client’s behalf
This is an extremely important function for the specialist insolvency litigation Solicitor. It can shape and guide the direction and outcome of the investigation process. It puts needed distance between the very focused and targeted Investigator and the company.
Ensuring company and Director rights and entitlements are protected
This applies in relation to the investigation process itself, in relation to dawn raids on premises that are occasionally carried out and in relation to any enforcement action that might ensue.
The Insolvency Service know us as we regularly work with them in relation to Company Directors Disqualification matters.
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