Directors In The Firing Line

While those running companies may be aware of the numerous management and accounting breaches that can give rise to civil liability, there is generally less recognition of the possibility that breaches can also give rise to criminal liability leading to fines, imprisonment or both. In recent years there has been a sea-change in the legislature's approach to directors' criminal liability. Although terms of imprisonment remain broadly consistent, fines have increased to a very significant degree. Directors are now in the firing line.

One might start by looking at the provisions in the Companies Act 1981 (the “CA”), where the approach remains traditional. Under the CA, there is criminal sanction in broadly three areas: accounting/record keeping failures; the failure to cooperate with a statutory investigation; and failures arising while the company is being wound up. The potential financial penalties remain low. Under section 83(5) of the CA a company must keep records