Employing a new director for your business without conducting the proper director checks can be a recipe for disaster, causing potential damage to your company’s reputation. Director checks are not as well-known as other types of identity checks and background checks but should be an important part of the recruitment process.
Director checks involve careful checking and verification of information related to individuals holding or applying for directorship positions in companies. These checks look at suitability, integrity, and financial stability of potential directors. They are especially important for directors who are involved in business partnerships, investments, or mergers and acquisitions. Checks help to safeguard both the business and its reputation, by making sure that you do not have someone in your business with a history of fraud, criminality, or financial mismanagement.
Carrying Our Director Checks
The director check looks at all current and past directorships. It will uncover any previous disqualifications as serving as a director, or current restrictions on directorial roles. Background screening companies will typically look at the following sources of information when completing their report:
- Companies House – maintains a public database containing information about registered companies and their directors. Director checks will access this database to verify details like the director’s name, date of appointment, resignation history, and current directorships.
- Director Disqualification – The UK’s Insolvency Service looks after the Disqualified Directors Register. This lists individuals banned from directorship due to misconduct, fraud, or other serious matters. Someone who has been legally banned from acting as a director is not allowed to be employed in a similar role.
- Companies Act 2006 – Director checks may include a review of the Companies Act 2006, by looking at things such as whether annual accounts have been submitted on time, and that there have been no other breaches of the legislation which could call character into question.
What are Employers Looking for?
Employers are looking at a wide range of factors when running a director’s check. Along with the basics of dates of appointment, details of previous companies, and any history of disqualifications, they are also looking at:
- Financial Stability: Director checks may involve a credit check on directors and their associated companies.
- Professional Conduct: Some director checks delve into professional conduct and reputational of directors. This may involve looking at whether there has been any misconduct action against a director, or whether any of their companies have been involved in other legal breaches.
Some details revealed on a director check, such as discovering an individual is banned from taking that role, will immediately rule out a candidate from working as a director. Other information may be less of a deal-breaker and the decision about whether to employ will depend on many other factors including past experience and performance at interview. Director checks can be much more in-depth than other background checking, simply because there is more at stake for a company if they get it wrong and employ someone who either damages the business’s reputation or is tempted to commit fraud.