Director disqualification, as stipulated by the Company Director Disqualification Act 1986 (CDDA), constitutes an integral component of the legislative structure aimed at addressing insolvency and the associated financial impropriety that may precipitate or result from insolvency. The Companies (Directors’ Disqualification) Act (CDDA) encompasses various grounds that may lead to disqualification, with the most prevalent being the directorship of an insolvent business. In this article, Director Disqualification Order, we take a look at the process involved and the options available to you.
Free initial telephone discussion
For a free initial discussion with a member of our New Enquiries Team, get in touch with us today. We are experienced in dealing with all the legal aspects of director disqualification orders and once instructed, we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you are on the best possible footing from the start and also avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
What are the reasons for disqualification as a company director?
A director runs the risk of disqualification if they fail to fulfil their legal and managerial duties. This includes:
Unfit conduct
The Company Directors Disqualification Act of 1986 (CDDA) governs director disqualification. The CDDA establishes the responsibilities of directors. It is possible to initiate director disqualification proceedings if it is believed that a director has engaged in or permitted others to engage in unsuitable conduct. Anyone can report the conduct of a company director, and reports are made for a variety of reasons. Upon receipt of a report, the Insolvency Service, acting on behalf of the secretary of state, will determine whether to conduct additional investigations.
Wrongful trading
Insolvent trading is grounds for disqualification of directors. In addition, if a director is found culpable of improper trading, they can be held personally liable for the company’s debts. Today, when a company enters insolvency proceedings, the conduct of the director is automatically investigated.
Nonetheless, directors can avoid disqualification in the event of insolvency if their behaviour is not deemed inappropriate. Therefore, while disqualification is most often pursued against directors of insolvent companies, the majority of insolvent company directors are not disqualified. However, if a director is declared bankrupt, he or she is automatically disqualified.
Noncompliance with competition law
A level playing field is provided by competition law to ensure that businesses compete equitably with one another. Competition law breaches can result in director disqualification, hefty fines, and even the possibility of criminal prosecution. In addition to other practices, “cartel” activity including price-fixing and bid-rigging is rigorously prohibited.
Not adhering to the registration requirements stipulated by the Companies Act
The Companies Act of 2006 requires company directors to ensure the accuracy and fairness of their annual accounts. In addition, the Act specifies the requirements for compiling annual accounts, including what they must contain and how they must be disclosed and filed. The laws vary depending on the size of the business. Failure to comply with these regulations is grounds for director disqualification.
What is the process for disqualification?
When a business enters any formal insolvency regime (administration, liquidation, or receivership), a director’s conduct will be scrutinised. If it appears to the office holder (official receiver, liquidator, administrator, or receiver) that a director is unsuitable to be involved in the management of a company, the office holder must notify the secretary of state (also known as the D Report).
The Insolvency Service investigates the director’s conduct upon receipt of the D Report, and disqualification action is taken if it is in the public interest.
If the secretary of state decides to take disqualification action, at least 10 days’ notice must be given to the director, although a longer notice period is routinely given. Disqualification proceedings must be initiated within two years of the company’s insolvency date.
When a court receives an application for a disqualification order, the court must issue one if it finds that the director’s conduct renders them unfit to be involved in the administration of a company. The duration of disqualification ranges from two to 15 years. If a director admits that they should be disqualified, they can offer a disqualification undertaking to avoid court action and avoid disqualification. This is equivalent to a court decree in force and effect.
What is the effect of a disqualification order?
A disqualification order prohibits a person from not only serving as a director, but also promoting, forming, or managing a company, or taking part in any of these activities. Therefore, a disqualified director cannot simply resign, appoint a family member or friend in their place, or continue to run the company themselves.
In addition to the CDDA’s prohibitions and restrictions, other statutes or organisational rules may also impose restrictions.
A person who acts as a director while disqualified commits a crime and may be held personally liable for the company’s debts. A bankrupt director who has not been discharged is inherently disqualified from being a director, and it is illegal for him to serve in that capacity.
How we can help
We have a proven track record of helping clients deal with the process involved in director disqualification orders. We will guide you diligently and ensure all checks are carried out swiftly and efficiently. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of corporate services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/corporate-legal-services/
How to contact our Corporate solicitors
It is important for you to be well informed about the issues and possible implications of a director disqualification. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Corporate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
Comments are closed.
