Is it easy to find out if someone is subject to a director disqualification order?
Once disqualified, that individuals details will appear on a public register (available online) maintained by Companies House. This register is not the easiest to find but is available publicly and is therefore accessible to anyone who is looking up these details. They will normally just need a person’s full name and date of birth (unless the name is unusual) to find out details of the start and end date for the disqualification. Financial institutions are increasingly using this information as part of their credit check in respect of business lending (although from a sole trader/partnership point of view this is not normally the case).
What is the average length of a director disqualification order?
At present the average length of a director disqualification is 6.2 years – this is the middle bracket of disqualification periods.
Does agreeing to a director disqualification undertaking open that person up to other potential claims?
The disqualification order or (if a person voluntarily enter into it) undertaking is only there to deal with the disqualification claim. If there are other claims which may be bought against a person in respect of the liquidated company, then the liquidator will need to prove these claims in their own right. A liquidator cannot rely on the fact of a disqualification to try and bring other claims against an individual.
However, it is important to be aware that the disqualification undertaking/order is publicly advertised at Companies House and thus in any other proceedings it can be referred to by way of evidence of misconduct. It is not unusual for liquidators with claims against directors to wait for the director to be disqualified to further bolster his/her claim against that person. This may not in proceedings be that effective, but will certain give them the edge in any negotiations with a person.
There are a wide range of claims which a liquidator may wish to bring against former directors or managers of businesses.
If an individual is not involved in a business any more, does it really matter how long that person is disqualified for?
If an individual is no longer involved in a business, then that person might not be too concerned how long he/she is disqualified for. However, it is always worth trying to lower the period of disqualification as much as possible.
That person’s circumstances might change and he/she might want to become a director or involved in the management of a business again at a later date. If that is the case that person will either have to wait for the period of disqualification to expire, or make an application to court for permission to become a director.
(i) The longer the disqualification period, the longer that person will have to wait for it to expire and the more serious the director disqualification period will impact on that person.
(ii) The longer the period, the more difficult it is to obtain permission from the court to become a director despite having been disqualified (although not impossible).
If an individual doesn’t have much money to spend on legal fees, is there a quick way of dealing with a threatened claim?
The answer is yes.
There is a process by which a “voluntary undertaking” can be given to the Secretary of State not to act as a director for an agreed period of time.
What happens if the Secretary of State misses the 2 year limitation period to issue legal proceedings?
If a director disqualification claim is not started within this time it is highly unlikely that any claim can be brought as leave of the court is then required and this is not often given. Very good reasons will have to be given by the Secretary of State for missing the 2 year time period.
Can a disqualification order be limited to certain areas / tasks?
(i) No. Partial or conditional disqualification is not permitted. The court only has jurisdiction to make a “complete” disqualification order.
(ii) In addition, the court cannot unilaterally decide to exclude a particular company from the terms of the order. It is absolute and covers all companies.
What happens if a disqualified director breaches a Director Disqualification Order?
If a person acts in breach of your director disqualification order, the penalties can be severe.
It can lead to imprisonment for up to 2 years and / or a fine [section 13 of the Company Director Disqualification Act 1986].
You can be held personally liable for the Company’s debts for the time you acted in breach of the disqualification order [section 15 of the Company Director Disqualification Act 1986].
Is there any way a person can act as a director or be involved in the management of a Limited Company once subject to a director disqualification order?
A person can act as a director, yes, but only if leave or permission is given by the court for a director to do so. This is specifically provided for under Section 17 of the Company Directors Disqualification Act 1986, but is subject to a rigorous process.
This is a separate application and requires expert legal advice to succeed.
Can a person act as a sole trader or partner if subject to a director disqualification order?
Yes. The Company Director Disqualification Act 1986 only applies to directors and managers of companies, Limited Liability Partnerships and certain Charities.
A person can be a sole trader or partner.
Which of the three categories of disqualification period can a director expect to end up if a director disqualification order is made?
Disqualification length depends very much on the “gravity” of the offence and subjective matters such as the losses of the company, the value of creditors claims, any evidence of a deliberate intention to defraud creditors (or any other members of the public), the degree of documentary evidence in support of such allegations and any breaches of other regulations (for example financial services breaches). As a rule of thumb, allegations involving any form of dishonesty will attract the longest periods of disqualification.
How long does a director disqualification order last for?
Director Disqualification has three distinct bands:
(i) A lower category of 2-5 years.
This largely relates to reckless or negligent conduct as a director in breach of his director responsibilities.
(ii) A mid category of 6-10 years.
This is classed as serious, and relates to conduct which is more directly prejudicial to the public interest.
(iii) The highest category of 11-15 years.