Can I Be A Director Whilst Bankrupt?

Acting As A Director Whilst Bankrupt

The answer to the question Can I Be A Director Whilst Bankrupt? is definitely NOT without Court permission.

It is an offence under Section 11 of the Company Directors Disqualification Act 1986 to act as a Director whilst being an undischarged Bankrupt without Court permission.

In order to obtain Court permission to act as a Director whilst bankrupt you need to give notice of the application to the Official Receiver who may attend Court and oppose it.

If you act as a Director whilst Bankrupt without permission you can be prosecuted. The case of Stephen Oleksewycz evidenced the Court issuing a sentence of 13 months specifically for acting as a Director whilst Bankrupt.

In a report issued by the Insolvency Service published on 11 August 2023, “Former Halifax footballer jailed for 27 months for illegally acting as a company director” (“the Report”) stated that Stephen Oleksewycz (“SO”), 39, from Halifax, was sentenced to 27 months imprisonment, at Leeds Crown Court on 3 August 2023.

An Exp With Limited of which SO was a Director was incorporated on 4 February 2016 and went into Creditors Voluntary Liquidation on 1 June 2017. He was made Bankrupt in 2016.

The Report said he was jailed for fraud offences and acting as a company Director while still within Bankruptcy restrictions and not discharged:

The fraud offences related to this event, where Oleksewycz sent fake documents to the venue company, EventCity, and the company streaming the event, Groovy Gecko.

When both companies contacted Oleksewycz to advise they had not received their fees to run the event, Oleksewycz sent them doctored bank documents purporting to show the payments had been made, as a stalling tactic in the days leading up to the event. This succeeded, and both companies felt they had to proceed in the hope the lack of payments were due an honest mistake and would be addressed, or risk the event collapsing.

However, after the event took place Groovy Gecko did not receive any payment and was owed over £15,000. EventCity was paid just £5,000 of the outstanding total, which was nearly £80,000. Both companies were then informed that An Exp With Ltd had gone into liquidation.

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Glenn Wicks, Chief Investigator at the Insolvency Service, said:

“Acting as a company director while being an undischarged bankrupt is a serious offence, and to compound this Stephen Oleksewycz deliberately defrauded two businesses who gave him the benefit of the doubt to run an event despite their concerns about his behaviour.”

There will be relatively few instances in which such permission is likely to be granted by the Court for an undischarged Bankrupt to act as a Director. However, in many situations by the time the matter is listed for a Court hearing the Bankrupt may very well already have either received or be close to receiving their discharge from Bankruptcy.

In the case of Stephen Oleksewycz, although a 27 month sentence was handed out for the fraud offences, it is notable the Section 11 offence of acting as a Director whilst being an undischarged Bankrupt resulted in a sentence of 13 months. The Court clearly sent a strong message out to the business community that it treats such matters seriously.