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Can I act as a director if I’ve had personal finance problems?

There are various ways in which an individual’s personal finances can impact their professional position or the operations of a particular company or organisation.

Unfortunately, there is no way to keep the two sides of the equation entirely separate at all times and there are instances in which personal financial problems can lead to director disqualifications or count against an aspiring business man or woman.

However, it is far from inevitable that feeling the financial squeeze or having a bad credit history will leave you unable to act as a director of a company, even if the issues are or were quite serious.

What matters most in this context is acting quickly and getting the right advice to help you address and overcome whatever personal finance problems you’re dealing with.

Bankruptcy

Bankruptcy is the most serious form of personal debt crisis in England and Wales, with sequestration functioning effectively as the equivalent in Scotland.

When an individual enters bankruptcy or sequestration they are effectively being forced into insolvency and they evidently have no means of paying off their debts or fully satisfying their creditors. As any kind of professional and particularly as a company director, this is precisely the scenario you should be most keen to avoid.

There are various consequences and restrictions that result from entering bankruptcy or sequestration, one of which is a ban on acting as a company director for a period of at least 12 months. Failing to adhere to these restrictions can result in legal consequences and potentially even lead to imprisonment.

Individual Voluntary Arrangements

Individual Voluntary Arrangements (IVAs), as their name suggests, are a voluntary means of tackling debt problems and reaching a repayment deal with creditors. Because the process is voluntary, there is scope for creditors to be satisfied to an extent that means they do not push for full bankruptcy.

The terms of an IVA, or a Trust Deed in Scotland, are legally binding and failing to stick to them is likely to lead to bankruptcy and a ban on being a company director. However, if an IVA agreement can be reached then there is potential for the individual to pay off portions of their debt rather than all of it, and to avoid bankruptcy and any kind of ban or restriction on company involvement. 

Debt Management Plans

Debt Management Plans are further down again on the scale of seriousness when it comes to personal debts. That isn’t to say though that the issues involved are trivial because they certainly are not. However, when the option is available, there is every reason to think that an individual debtor can use a Debt Management Plan to steadily settle their arrears and move on from their personal finance worries without it affecting their professional lives.  

Fast action and good advice

Whatever the scenario might be, for company directors or anyone hoping to take up a similar role, the focus should always be on tackling personal debts in as swift and straightforward a manner as possible.

While there are usually ways of avoiding worst-case scenarios, there is also a real danger of seeing debt problems slip into ominous territory, which can quickly jeopardise your position and prospects if you’re currently or  hoping to be a company director. 

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