Restrictions on Disqualified Directors in the UK

A director of a company can be disqualified for not adhering to the duties of a director as laid out by the CDDA (Company Directors Disqualification Act of 1986). Some of the main reasons include wrongful or fraudulent trading or unfit conduct which may result in an investigation and disqualification. The CDDA contains very significant powers to stop directors who have been found to be ‘unfit’ from becoming directors in any limited liability company for a specific period of time,usually fifteen years. However,before any action is taken the government agency has to prove unfit behaviour or wrongful doing has occurred. Disqualification only occurs when a director has been found guilty of acting fraudulently,wrongfully,or in some other way,very badly.

As well as this,the Small Business,Enterprise & Employment Act has introduced more measures since October 2015 to disqualify directors who have been involved in insolvent businesses in the past or who have had an influence on other directors who operated insolvent businesses.

Directors involved in offences abroad can now also be disqualified if a court wants more time to review the evidence.

Director disqualification is a very serious issue which will be registered at the Companies House,where all new directorships are monitored. Details of disqualified directors are provided to any relevant party on request. If a court has made a disqualification order against a director or the Department has accepted a disqualification undertaking,a director can be sent to prison if the order or undertaking is contravened.

What are the Restrictions on What Disqualification Directors Can Do?

It is recommended that disqualified directors consult a solicitor or insolvency practitioner to fully comprehend the details of the particular order or undertaking that may be applied,and the effect it will have. It does not prevent a disqualified director from employment,however,unless court permission has been granted it does not allow:

  • Being a director of a company
  • Acting in the capacity of a receiver of company property
  • Taking part in or being concerned with the formation,management or promotion of a company
  • Acting as an insolvency practitioner
  • Holding various offices such as the trustee of a charity

Plus,while a director disqualification order or undertaking is in place a disqualified director cannot:

– act in the capacity of a director and the order or undertaking cannot be avoided by simply changing a job description

– allow other individuals to manage a company under their direction

The order or undertaking allows a disqualified director to carry on business in partnership with others or as a sole trader but is not able to,take part in or be concerned with the setting up,management or promotion of any limited liability company.

The abovementioned prohibited acts and restrictions apply to all companies formed in England,Northern Ireland,Wales,and Scotland as well as foreign companies if:

– the company is registered in the United Kingdom

– the company has sufficient connection even if it is not registered in the UK,for example,it has assets or carries on business in the UK.

These prohibited acts and restrictions also apply to building societies or incorporated friendly societies.

Permission to Act in a way Otherwise Prohibited by a Director Disqualification Order or Undertaking

A formal application must be made under Article 21 to the High Court for permission to act as a director of a company or to carry out anything else prohibited by the order or undertaking. The court will have to be satisfied that a reasonable need is present before granting permission. However,a court can never grant a disqualified director permission to act as an insolvency practitioner. The court will also have to be content that if permission is granted the public will be adequately protected and may impose conditions and require certain safeguards.

If the order or undertaking is contravened it becomes a criminal offence which could result in a fine or a prison sentence of up to 2 years. A disqualified director may also be personally liable for any debts incurred by the company while the order or undertaking was being broken. All persons acting on the instructions of a disqualified director may also be held personally liable for such debts.

If you in danger of being disqualified as a director and require help,then please do check out this site: https://www.ndandp.co.uk

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