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Different parties can bring fraud allegations against company directors, and this often impacts how cases are handled.
When companies discover fraud internally, they often prefer civil remedies like negotiated resignations and financial settlements rather than criminal prosecution. This approach can enable companies to resolve director fraud issues internal while protecting their reputation and business operations. However, once external bodies like regulators or law enforcement become involved, the company loses control over the process and outcomes.
Director fraud matters are legally and tactically complex, requiring experience, precision, and strategic judgment. We have specialist and experienced lawyers who deal with both the civil and criminal aspects of fraud.
False and Misleading Statements - including financial misrepresentation such as falsifying accounts or overstating profits, false claims to potential investors or misleading information during public procurement processes or contract bids
Fraud by False Representation - offence under Section 2 of the Fraud Act 2006 occurs when a director dishonestly makes a false representation intending to make a gain, cause a loss to another, or expose another to risk of loss. This representation can be express or implied, made through words, conduct, or omission.
Fraud by Failing to Disclose Information - such as withholding material information from shareholders, regulators, or other stakeholders.
Fraudulent Trading - insolvency related fraud
Directors may be liable for wrongful trading if they continue operating when they knew or should have known the company was insolvent, or for fraudulent trading if they conduct business with intent to defraud creditors.
Our fraud and commercial litigation team combines legal expertise with strategic insight. We advise and assist clients with :
Investigating suspected director fraud, preserving and documenting evidence for civil or criminal proceedings
Obtaining injunctions, freezing orders, and disclosure
Recover losses via damages, restitution, or account of profits
Removing dishonest directors and dealing with issues with issues relating to any shareholdings they have (whether by way of negotiation, transfers, buybacks, or court-ordered solutions) in accordance with the company’s articles or shareholder agreements
Employment law issues – if the director is an employee, due process before dismissal is still necessary.
Co-ordinate civil and criminal action where appropriate.
Remove dishonest directors and address their shareholdings, including transfers, buybacks, or court-ordered solutions under articles or shareholder agreements
Private prosecutions – pursuing a private criminal law process as well as or instead of civil law action.
Advise and represent directors facing allegations or claims, ensuring their legal and procedural rights are protected.
While fraud is strongly associated with criminal wrongdoing, most director fraud claims are pursued through civil proceedings. The reason is simple: companies, shareholders, and creditors are primarily concerned with recovering losses caused by the director’s misconduct. Civil law provides tools to:
Compensate the company for financial losses
Recover misappropriated funds or assets
Reverse or undo improper transactions
Hold the director accountable for unjust enrichment
Criminal proceedings, by contrast, are focused on punishing wrongdoing and can lead to fines or imprisonment. They are often slower, less predictable, and largely outside the control of the company or shareholders, which is why civil action is usually the first and most practical route.
The company — for breaches of fiduciary or statutory duty.
Shareholders — derivative claims under Part 11 of the Companies Act 2006.
Liquidators/administrators — for fraudulent trading or misconduct harming creditors.
Regulators — Insolvency Service, FCA, SFO, HMRC.
CPS — for criminal prosecutions; private prosecutions may also be possible.
When fraud is suspected within a company, prompt and appropriate action is critical. The following steps help protect the company, preserve evidence, and manage risk:
Secure evidence and maintain confidentiality – Preserve all relevant documents and electronic records. Limit knowledge of the investigation to essential personnel only to prevent leaks or tampering.
Assemble the right expertise – Engage independent legal counsel and, where necessary, forensic specialists such as accountants or IT investigators to ensure a thorough and credible investigation.
Conduct a thorough investigation – Review company records, financial statements, emails, and other documentation. Interview relevant individuals and analyse transactions to establish a clear factual picture.
Consider applying for an Injunction - a successful application may prevent the dissipation of assets, stop ongoing misconduct, and preserve evidence. Early applications can be decisive in protecting the company’s position while investigations and civil claims are pursued.
Consider reporting obligations – Assess whether regulators, insurers, or law enforcement bodies need to be notified depending on the scale or nature of the suspected fraud.
Remedial and recovery actions – Once the investigation establishes concerns, take steps such as disciplinary measures if warranted, pursuing civil recovery options, and enhancing internal controls to prevent recurrence.
Director protection measures – Non-involved directors should document any concerns in writing, seek independent legal advice if necessary, and consider resignation only as a last resort, after recording all efforts made to address the issue.
External reporting – Depending on the nature and severity of the fraud, report to the appropriate authorities, such as Action Fraud, the Insolvency Service, or the Serious Fraud Office (SFO).
Employment law compliance – If suspending a director or employee, ensure the suspension is with full pay, properly documented, proportionate, and clearly communicated as a neutral precautionary measure pending investigation, not a disciplinary action.
For most fraud offenses under UK law, the following essential elements must typically be established:
False or misleading representation/statement - the director must have made a representation or omitted information that was false, misleading, or deceptive.
Dishonesty - most fraud offenses require proof of dishonesty, assessed using the objective test established in recent case law. The court will consider whether the conduct was dishonest by the standards of ordinary, reasonable people.
Intent - the director must have acted with intent to make a gain for themselves or another, or to cause loss to another or expose another to risk of loss. The intent element is crucial - it distinguishes fraud from mere negligence or incompetence.
Legal duty (in certain cases) - for fraud by failing to disclose information, there must be a legal duty to disclose the information that was withheld.
Importantly, for criminal fraud prosecutions, it is not necessary to prove that any actual loss occurred or that anyone actually relied on the false representation. The offence is complete when the dishonest representation is made with the necessary intent. However, in civil fraud cases, proving actual reliance on the misrepresentation and resulting damages is typically required.
Civil Liability — compensate the company or creditors and an account for profits.
Disqualification — up to 15 years, preventing directorships or management involvement.
Criminal Prosecution — Fraud Act 2006 up to 10 years; Theft Act 1968 up to 7 years.
Confiscation Proceedings — stripping directors of criminal gains in serious cases.
Early and specialist advice is critical. Director fraud matters are legally and strategically complex. Acting promptly and strategically can protect assets, limit and possibly recover loss, and prevent further misconduct. Contact us for a confidential first discussion.
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