In 2015 new powers were given to the Insolvency Service which would allow them to obtain compensation from disqualified directors. It was introduced so that directors would be liable for their unfit conduct where this caused a quantifiable loss to one or more creditors.
The application must be made by the Secretary of State within two years of the disqualification and the unfit conduct has to have occurred on or after the 1st October 2015.
Previously only office holders had the option to seek recovery from the director for their actions and debts due to the company, the new powers granted to the Secretary State now allows them to take action where the office holder has not done so and if there is a clearly identifiable loss to the creditors.
In a landmark decision the Court has recently made the first Compensation Order submitted by the Secretary of State against a director in the sum of £559,484.
The company director was disqualified for the maximum of 15 years in May 2019.
A Liquidator was appointed in June 2017 when the company went into Creditors Voluntary Liquidation with an estimated deficiency of 1.7 million. Investigators discover that from November 2015 and October 2016 the director authorised payments from the company to a connected company. The director never explained the legitimacy of these payments which lead the Secretary of State seeking a Compensation Order.