Ignorance; not so bliss in director disqualification

On the failure of a company, the Insolvency Service may, following investigations, seek to disqualify directors from acting as such for a fixed period of time.

Historically, behaviour that is likely to attract attention is failure to pay Crown debts – VAT and PAYE being the liability that is most often not paid, underpaid or undeclared. This is viewed as funding a business using tax payers’ money.

However, it is not only those who keep creditors out of money that may fall foul of the Insolvency Services’ powers. Employing workers who do not have a legal right to work in this country may see a director being disqualified.

This may sound obvious – of course illegal employment cannot be tolerated and will have consequences – but sometimes this might happen by a genuine mistake, perhaps forgetting to check visa renewals. Lack of dishonesty is unlikely to save a director from disqualification.

With hotels and restaurants employing a high proportion of foreign workers, directors should be aware that they need to be diligent in ensuring that their staff have a right to work in the business, in order to protect their own livelihood.

The criminal offence of knowingly employing a person who is not authorised to work in the UK has a maximum civil penalty fine of £20,000 per unauthorised worker. This offence has recently been extended to include employers who have “reasonable cause to believe that the employee is disqualified from employment by reason of the employee’s immigration status”. Those convicted on indictment could receive a maximum custodial sentence of five years. To protect itself an employer should:

• obtain one or more original, valid proof of the right to work in the UK documents from the Home Office-prescribed lists
• check the authenticity and validity of those documents in the presence of the applicant
• keep clear electronic or hard copies of the documents showing the relevant information