Directors can continue running business despite disqualification

Two directors have been granted permission to continue running their companies despite being disqualified for breaching regulations. The court accepted that they were essential for the continuation of their business and hundreds of jobs could be a risk if they were not allowed remain at the helm.

The case involved two directors of a company within the International Metal Industries group.

Following a formal investigation opened in July 2017 under the Competition Act 1998, the Competition and Mergers Authority (CMA) found that companies in the group had infringed competition law by entering into anti-competitive arrangements in relation to the supply of rolled lead.

Following further investigations by the CMA, the two directors in this case admitted that their conduct was such as to make them unfit to be concerned in the management of a company and they gave competition disqualification undertakings under the Company Directors Disqualification Act 1986 that they would not act as directors of any UK company for four years and three years respectively from May 2021.

However, they subsequently applied for leave to act as directors of nine named companies in the International Metal Industries group.

The CMA did not oppose the application as long as it was limited to specified companies and corporate governance safeguards were put in place.

The court granted the application.

It held that the court should give due weight to the nature and seriousness of the conduct that led to the undertaking and the purposes of protecting the public and deterring others.

However, there was a need for the directors to be involved in the management of those nine companies. If they were not allowed to continue, it was likely that the companies would fail.

Only they had the necessary knowledge and experience to run the business and the necessary relationships with lenders, customers and suppliers. There was no one else in the business who could take on their role.

They were also prepared to invest further funds in the business if they were directors. If the companies failed, there would be a loss of nearly 250 jobs and a reduction of competition in the market.

The companies needed the directors for their survival.

The public could be adequately protected. A competition compliance officer had been appointed and made a director of all the companies and an independent non-executive director had been appointed with responsibility for overseeing competition compliance.

The extensive and continuing requirements proposed by the CMA minimised the risk to the public of misconduct and promoted high standards of corporate governance.

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International Metal Industries Ltd, Re
Chancery Division
22 July 2021
Eason Rajah QC