Company Directors Disqualification Act (CDDA) 1986
The CDDA covers the whole of the UK and notably provides that a director can be disqualified for up to 15 years. The period of disqualification is decided by the court on a case-by-case basis and can reflect the seriousness of the conduct.
CDDA is law that outlines the procedures for investigating and disqualifying a Director for misconduct.
If the Director is being investigated as a result of a Liquidation, they are investigated for their time as Director until the company went into a state in insolvency i.e. no longer able to pay their debt and expenses.
If the Director is being investigated due to a report submitted by someone, the investigation period is based on the contents of the report.
In the case of Liquidation the Insolvency Practitioner will pass the case to the Insolvency Service or they’ll be notified via a public request to investigation. They do not take on all the Director cases that are passed onto them.
The Director should not fight their own case. They should seek expert representation.
A lawyer who is used to fighting such cases, even better an Insolvency Practitioner, because they deal with situations like this all the time.
The questions will be based around the financial situation of the company. For example, a Director may be asked when they first became aware the company was insolvent, if any assets were undersold or if certain creditors were wrongfully preferred over others. The questions depend on the nature of the case.
A Director will be explained what CDDA is via a letter. There will also be some emails and questionnaires to answer at the beginning of the investigation.
No. The entire purpose of the form filling is for the investigators to better understand the case and its circumstances.
It is highly advised to use an experts help to answer the questions. This is because the answers will be used to determine the case and all follow up investigations.
The investigators will set a deadline to receive the answers. It is important Directors are not pressurised into answering the questions in a certain way nor to answer quickly and in haste. Directors should take their time and ask for more time if need be.
The Insolvency Service may set a deadline for two weeks in usual cases.
It is in the interest of the Insolvency Service to set quick deadlines because they have ‘disqualification’ targets to meet.
The deadline is not legally binding so there will not be any legal consequences. If a Director knows they will not be able to meet the deadline, they should ask for an extention.
There isn’t any formal process. A Director simply lets them know via the line of communication that they first received the questionnaires and emails.
Anything that helps the case. For example, a Director may need more time to think about their answers or need the time to gather and find the data to submit the answers. As long as the reason satisfies common sense, it should be accepted.
Usually not without a valid reason i.e. stumbling across new data that would change the answers.
Not dealing with the situation will not make it go away. It’s best to answer as promptly as possible and be cooperative.
A Director can request access to any records they need to answer questions. There is no requirement to only answer from memory.
For an investigation, a Director will need access to records for the Company they are managing, so that data should be easy to get. Should they be with someone else already, such as the Insolvency Practitioner, the Director can request these off them in order to answer questions.
The Insolvency Service need to be made aware, especially if obtaining records will cause a delay in providing all required responses.
Three years from the date that the Company entered Administration or Liquidation.
Two years if the Administration/Liquidation occurred before October 2015.
The Insolvency Service is barred from starting procedures after three years unless they get Court permission.
No, because it is the Insolvency Services fault for leaving it late.
Through the Affidavit provided by The Insolvency Service.
A list of all section numbers from The Insolvency Act 1986 of the breaches and allegations made against the Director, the main transactions for the corresponding legislations, which goes with the allegations made and all other supporting evidence.
It is essentially a letter of intent to issue a disqualification claim against a Director. It should be received 10 days before the investigation begins.
Yes a Director can, via a detailed letter setting out their defence to either reduce the claims against them or even remove some of the claims made.
This is not allowed and you can use this as a basis to make a claim.
One of the possible responses you can provide to a Section 16 Letter or the Affidavit is a voluntary undertaking, where you nominate yourself to be disqualified before things go further.
No you do not have to. Do not let the Insolvency Service pressure you into one, especially if you feel you are not guilty of any misconduct.
This is not allowed. You cannot run a company nor can you run the company from the background whilst putting people in place as Directors to act as the ‘face’ of the company.
You can make an appeal to the Court.
Yes, that is fine. Do not try to run the Company as a Shareholder, because it is a criminal offence.
You cannot take up a job as a regular employee at your existing Company or with a Company that has a relationship to it.
It’s a criminal offence, you can be fined or sent to prison. You could even be made personally liable to cover debts of any Company you attempted to represent.
As of 15 February 2022, the Insolvency Service can investigate, prosecute and disqualify directors of dissolved companies. This is to combat directors who abuse the dissolution process. Such directors will now be included within the remit of the Company Directors Disqualification Act 1986 (CDDA).