An update: the importance of maintaining adequate company accounting records in the context of director disqualification

  • Director Disqualification

A company is obliged to keep adequate accounting records in accordance with section 386 of the Companies Act 2006. This provision sets out a number of requirements for a company’s accounting records, including that they must show and explain the company’s transactions and disclose with reasonable accuracy, at any time, the financial position of the company.

The recent decision of Secretary of State for Business, Energy and Industrial Strategy v Rajgor [2021] EWHC 1239 (Ch), [2021] All ER (D) 51 serves to reinforce the importance of maintaining adequate company accounting records in a director disqualification context.

In this case, the Secretary of State argued that the defendant director failed to maintain or preserve adequate accounting records. The defendant director argued that bags of company records were taken to his interview with the Insolvency Service but an examiner refused to review them. The court was not persuaded by this argument and imposed a period of disqualification for seven years. Given that the maximum period of disqualification is 15 years (and in this case, there were no allegations of fraud for example) this demonstrates the court's no-nonsense approach to allegations of misconduct of this kind.

This case highlights the importance of preserving and maintaining adequate company accounting records. In practice, the court is unlikely to be persuaded by an argument that the records were kept but not delivered up or alternatively an argument seeking to blame others for a director’s failings.

If you require any director disqualification advice, please contact our team of experts today on 020 7467 3980 for a free initial telephone consultation

Article Author

Alice Court

Alice Court