Circumstances where a director can be disqualified

When can a director be disqualified?

It is really important that you fully understand the claims being made against you as soon as possible so that the best solution can be reached.

It is vital to understand the allegations of misconduct being made against you. I have been dealing with Directors for over 34 years and more specifically the Directors Disqualification legislation for over 20 years. I have successfully reduced the number of years you can be disqualified for and have found mitigating circumstances in most if not all of my cases.

One of the recent cases I worked on was where the aim was to protect the public interest from directors who abused their position of trust and confidence as the representatives of a limited company.

• being disqualified as a director does not stop you from running your own business or running a business in partnership with another in your own names but it DOES prevent you from acting as a director of a limited company, as a representative of certain incorporated charitable associations including Industrial & Provident societies and Friendly Societies or as a partner of a Limited Liability Partnership

Insolvency

The director’s conduct is reviewed, investigated and examined in the time leading up to the insolvency when a company is placed into any form of insolvency proceeding. So, this is either a compulsory liquidation, administration, and a creditors voluntary liquidation. This then leads to investigations into whether directors should be disqualified, with the intention that their behaviours would not be repeated. In the same way if a person is declared bankrupt then disqualification as a director will be automatic.

Misconduct

Even where the company is placed into insolvency proceedings, most directors are never disqualified from acting as a director.

• directors most commonly disqualified are those who are found to have been guilty of misconduct in the management of a company or who are not considered sufficiently competent to retain such a position of trust

• misconduct can be anything from breaching the statutory requirements as prescribed in the Companies Act legislation or avoiding deliberately to pay taxes through to fraud and criminal acts

• misconduct does not have to be deliberate in nature for a director to be disqualified – it can comprise negligence or carelessness and many disorganised directors can find themselves disqualified

• the purpose of director disqualification is to protect the public, not prosecution of the guilty

Here’s a list of the most common things which can lead to disqualification of a director

So, there is a specific statutory framework which governs when directors or any individual, regardless of whether they have previously been a director may be disqualified from acting as a director. These include

Company Insolvency

Persistent breaches of the Companies Act 2006

Criminal Proceedings

Bankruptcy

Public interest winding up

Fraud