Director disqualification

You have received a disqualification order, either for a minimum of one year up to a maximum of fifteen, and you may think it is a relatively simple matter to not be employed as a company director during this period. Be warned.

The effects of a disqualification order go beyond a simple prohibition. It also prevents you from:

• Being concerned or taking part in the promotion, formation, or management of a company; and
• Acting as a receiver of a company’s property.

Of these activities, it is the promotion, formation and management of a company you should be wary of. This provision takes away the emphasis from your job title and places it on your actions, which, if deemed in excess of those expected of a non executive employee, will result in breach. A disqualified person will almost certainly be in breach if he acts as a company secretary or other officer of the company. Suffice to say, if you are found to be acting as a shadow director you will be in default.

Further, the prohibition isn’t limited to companies; it also prevents you from holding quasi directorial positions in:

• limited liability partnerships;
• building societies;
• incorporated friendly societies;
• NHS foundation trusts; 
• open-ended investment companies; and 
• acting as trustees of charitable trusts.

The punishment for breach? Criminal liability of up to 2 years in prison or a fine or both and personal liability for any relevant debts of the company incurred while you were involved.

You could consider applying to the court for leave despite the disqualification order. This is common in practice and if granted, allows a disqualified director to make a living as a director while being restricted by court imposed conditions. Whether the court will be minded to grant this is another matter which would be dependent on the seriousness of your previous misconduct and your present needs.

Please contact Sing Li on 01582 514 356 or by email on [email protected] if you would like to discuss the matters raised in this article or any other aspect of commercial law.