Kangs Solicitors regularly acts for individuals who face Company Director Disqualification proceedings.
If you receive notification of such proceedings from the Insolvency Service, it is important to act quickly as non-compliance can have a devastating impact on your future ability to act as a company director.
Our team of lawyers is experienced in advising clients in all aspects of director disqualification proceedings including the preparation of written representations to the Insolvency Service, negotiations in relation to director disqualification Undertakings and the defence of contested High Court proceedings.
For an initial no obligation discussion, please call our Team at any of our offices detailed below:
In this article, Hamraj Kang of Kangs Solicitors discusses the implications of a director disqualification order and the options available to an individual if such an order is made.
How Does A Disqualification Happen? | Insolvency Service Solicitors
An individual can be disqualified as a company director under the Company Directors Disqualification Act 1986 (CDDA).
The disqualification can arise as follows:
- The individual has provided a signed undertaking accepted by the Insolvency Service agreeing to a specified period of disqualification.
- A court order is made disqualifying an individual for a specified period of time.
The period of disqualification ranges from two years to fifteen years.
Who Knows About The Disqualification? | Director Disqualification Lawyers
When an individual has been disqualified it becomes a matter of public record.
Companies House maintains a register of all individuals who are disqualified directors.
The Insolvency Service maintains its own publicly available record of each disqualified director which includes details of the ‘unfit conduct’ which led to the disqualification.
What Does a Director Disqualification Order Mean In Reality?
An individual who has signed a voluntary undertaking or is the subject of a court order disqualifying them from being a company director must not:
- act as a company director of any company
- take part, directly or indirectly, in the promotion, formation or management of a company or a limited liability partnership (LLP)
- be appointed as a receiver of a company’s property
- act as an insolvency practitioner
Promotion or Formation of a Company | Director Disqualification Solicitors
A disqualified individual cannot promote a company and, in certain instances, that prohibits that person performing acts even before the company is formed. An example of this would be an individual who is raising capital for the company before it has been formed.
The prohibition in relation to the formation of a company means that an individual cannot be involved in any of the steps involved in incorporating a company.
Management of a Company | Kangs Director Disqualification Solicitors
Management of a company does not just cover its internal affairs and the task of management can be performed without the formal title of or registration of appointment as a ‘director’.
A director disqualification order prevents an individual being concerned in the management of a company. This is not defined narrowly and will encompass a variety of scenarios including:
- acting as a ‘consultant’ to the company
- conducting tasks that are normally the preserve of a company director such as recruiting staff, setting the terms of business with suppliers and customers and operating the company bank account
- taking strategic decisions on behalf of the company such as decisions to open or close certain operations and explore new markets.
The above are a few examples of ‘management duties’ and the courts have declared numerous other activities as amounting to the ‘management of company affairs.’
What are the Consequences of Breaching a Court Order or Undertaking?
The consequences can be serious both in terms of criminal and financial liability.
Breaching the terms of a court order or an undertaking is a criminal offence and punishable by up to two years imprisonment. In addition, the criminal court has the power to impose a fine and extend the period of director disqualification for an additional period.
An individual is at risk of personal financial liability as any debts incurred by the company during the period the order/undertaking was being breached can be pursued personally against the individual.
Any individual who assists a disqualified individual and acts as a ‘puppet director’ controlled by the disqualified person can also be at risk of criminal prosecution and held personally liable for any debts incurred by the company.
In addition, a liquidator or creditor may bring civil proceedings in respect of any losses suffered by the company due to the unfit conduct of either the disqualified director or those who assisted him manage the company.
Many investigations in relation to breach of court orders and undertakings are commenced by the Insolvency Service as a result of intelligence received from members of the public.
Can I Continue to Act as a Director Following Disqualification?
There is provision under section 17 CDDA which allows an individual to continue to act as a company director following his disqualification.
Only the court can authorise a disqualified person to act as a director. The Secretary of State will be asked for his views and the court will often require strict safeguards and conditions to be put in place in order to ensure that the public and creditors are suitably protected.
For further details on section 17 CDDA applications, please follow this link for our previous article on this topic.
A Reputation Built on Trust and Expertise | Director Defence Solicitors
Since 1997 we have been here to assist our clients and to provide positive solutions to whatever issues that may arise for company directors.
We instil a sense of calm in our clients, provide forthright and frank advice, and above all, provide our clients with practical solutions.
How Can I Contact You? | Kangs Solicitors
Hamraj Kang leads an award-winning team of solicitors nationally reputed for its excellence.
We welcome new enquiries by telephone or email.
Our team of lawyers is available to meet at any of our offices in London, Birmingham or Manchester or, alternatively, we are happy to arrange meetings via video conferencing.
For initial enquires please contact: