Criminal Prosecution Involving Company Directors

The Companies Act 2006 and Insolvency Act 1986 contain a number of criminal offences. The Insolvency Service investigates and prosecutes insolvency-related fraud and corporate wrongdoing committed by directors.

The specialist lawyers at JMW have vast experience in advising on and defending criminal prosecutions brought against directors.

To speak to a solicitor about defending against criminal prosecution, contact JMW today by calling 0345 872 6666, or fill in our online enquiry form and request a call back.

How JMW Can Help

We regularly advise directors on their duties and options when they have been accused of a criminal offence. Our team has experience defending directors in relation to proceedings brought by insolvency practitioners and other government authorities.

The team includes an experienced licensed insolvency practitioner and we work with forensic accountants and other services to tailor the level of service and cost to the client’s needs. We also work regularly with some of the UK’s top barristers.

Our solicitors are experts in confiscation and restraint proceedings and have a track record of challenging court orders.

Examples of Criminal Offences Involving Company Directors

The most common offences under the Companies Act 2006 and Insolvency Act 1986 are as follows:

• Fraudulent trading - it is an offence to knowingly carry on the business of a company with intent to defraud creditors of the company, or creditors of any other person, for a fraudulent purpose
• Breaching duties to keep accounting records - it is an offence if a company fails to keep adequate accounting records
• Company unlawfully acquiring its own shares - it is an offence for a limited company to acquire its own shares
• Restriction on the reuse of a company name - it is an offence to reuse a company name of a former company that has gone into insolvent liquidation
• Making a material omission from a statement relating to a company’s affairs
• Destroying, mutilating or falsifying company records
• Misconduct by an officer of the company during the course of a company being wound up - there are six distinct offences under s208 of the Insolvency Act 1986

The Fraud Act 2006 and Theft Act 1968 also contain criminal offences:

• Fraud by false representation - it is an offence to dishonestly make a false representation with a view to gain or with the intent to cause a loss to another or expose another to a risk of loss
• Fraud by failing to disclose information where there is a legal duty to disclose it - it is an offence to dishonestly fail to disclose to another person information that a person is under a legal duty to disclose with a view to gain, with intent to cause loss to another, or expose another to a risk of loss
• Fraud by abuse of position - it is an offence to dishonestly abuse a position in which a person is expected to safeguard, or not to act against, the financial interests of another person, with a view to gain, with intent to cause loss to another, or expose another to a risk of loss
• False accounting - an offence is committed where a person dishonestly, and with a view to gain or intent to cause loss to another, either:
• (i) destroys, defaces, conceals or falsifies any account or document made or required for any accounting purpose 
• (ii) furnishes information for any purpose, or produces or makes use of any account or document which to their knowledge is misleading, false or materially deceptive
• False statements by company directors - a company director or other officer commits an offence if they publish or concur in publishing a written statement or account, which to their knowledge, is or may be materially misleading, false or deceptive

Many of the provisions on criminal offences impose liability on every officer of the company that is in default. A director or officer who “authorises or permits, participates in, or fails to take all reasonable steps to prevent” an offence will be in default. Accordingly, directors who have inadvertently committed an offence are still caught.

In the context of liquidation, directors owe duties to the appointed officeholder and the company’s creditors.

What Penalties Can Be Imposed?

Any director convicted of an offence under the Companies Act, Insolvency Act, Fraud Act or Theft Act will likely be subject to a fine and, in more serious cases, imprisonment.

A director found guilty of an offence will typically be subject to disqualification proceedings and may be personally liable for any loss suffered by the company as a result. Confiscation proceedings are also likely to follow in serious cases, with the aim of stripping the director of their criminal gains.