There are many aspects to think about as a director in liquidation, and many things you will need to be made aware of too. In this blog, we’re answering the question, what is a director’s conduct report and should I be worried?
What is a director’s conduct report?
Filing the director’s conduct report is a large part of the insolvency practitioner’s role. They are duty-bound to complete the report, so there’s no point hoping that details won’t be found out about.
Here are some things that are considered in a director’s conduct report.
- Director’s actions
- Director’s management of finances
- Whether the director has complied with legal obligations
After hearing this, many directors begin to panic and think the worst is about to happen. However, a director’s conduct report doesn’t mean it’s the end of the world. The report is just an essential part of the insolvency process.
The aim of completing the report is to provide an impartial assessment of your conduct as a director. It will take into account your conduct towards creditors and stakeholders. Once completed, the report is sent to the Insolvency Service.
Should I be worried about a director’s conduct report?
Now, what if you are the director in question for this report? Well, here’s what you need to know.
You’re able to respond
If you find that your director’s conduct report contains information that you believe is untoward, you can respond. This allows you to give your own account of the events and provide justifications as to why you took the actions that you did. It can also be useful to provide evidence that may strengthen your case.
If you find yourself responding, the insolvency practitioner will take what you say into account when finalising the report before it is sent out.
What if the report finds that you’ve done something wrong?
If the report finds that you’ve done something wrong, you could face some serious consequences. For example, you could be disqualified as a director or face a personal liability notice. This notice means that you could be liable for some or all of your company debts.
One thing that the insolvency practitioners will be checking carefully is whether you have any overdrawn director’s loan accounts or if you paid anyone preferentially.
The liquidator will also pay close attention to your bounce-back loan and whether you applied for the correct amount or inflated your turnover. They will want to know how you spent the money from the bounce-back loan, whether it was spent correctly or for personal benefit. This may include paying for a new car or extension, which the loan was not intended for. This is known as bounce back loan fraud.
The insolvency practitioner will also want to see if you have sold any assets undervalue before liquidating. This will land you in trouble. If you want to sell assets before the liquidation, you must ensure that you have an independent valuation completed and retain all documentation relating to the sales.
What to do next
You should seek advice if you are concerned about any of these aspects. It’s important to remember that not all director’s conduct reports lead to a negative outcome. If it’s found that you’ve acted in good faith, complied with your legal obligations and did everything you could to try and save the company, then you’re unlikely to face any serious consequences.
In conclusion, a director’s conduct report can be a worrying prospect, but it’s important to remember that it’s just one part of the insolvency process. If you’re the subject of a report, make sure that you respond to the insolvency practitioner appropriately and in a timely manner.
If you’ve become insolvent and you’re struggling to pay your debts on time, get some advice early. The earlier you seek advice, the better the outcome for everybody, including you. Seeking advice early will also look better in your director’s conduct report. We hope that you’ve found this blog useful into director’s conduct reports.