What is a Disqualified Company Director?

What is a Disqualified Company Director? An individual may be banned or disqualified from acting as a company directory for certain unprofessional or questionable conduct. Disqualification for misconduct may be imposed if a person does not meet their legal responsibilities as a company director. Disqualification is possible through the Company Directors Disqualification Act, 1986. When disqualified, an individual is not permitted to serve as a company director and certain positions of authority, as well as undertake certain business-related activities.

About Disqualification

A person may be disqualified from being a company directory if their behaviour or conduct is deemed unfit. This assessment is made by an insolvency practitioner or a member of the public who reports a director's conduct. An individual may also be automatically disqualified from serving as a company director if they are declared bankrupt. Automatic disqualification also occurs when an individual received a Debt Relief Order or is subject to bankruptcy restrictions.

Unfit conduct for a company director includes wrongful trading or allowing a company to trade when it is unable to pay its debts. Unfit conduct also includes not complying with filing requirements under the Companies Act, such as not keeping proper company accounting records and not sending accounts or returns to Companies House is also considered unfit conduct. It also includes using company money or assets for personal gain and not paying government tax owned by the company. Breaches of competition law and unfit conduct related to the promotion, formation, management or liquidation of a company may also result in disqualification.

Disqualification Process

An individual may be investigated if there is a complaint made by a member of the public. They may also be investigated during insolvency proceedings by the Insolvency Service, which acts on behalf of the Secretary of State. An investigation may delve into a company as a whole or focus on the individual director in question. If it is deemed that the director with questionable or unfit conduct did not act within the legal responsibilities for a company directory, a written report will be prepared. The report will outline the rationale as to why the individual is deemed unfit as a company director, when the disqualification process will begin, and how the individual may respond to the ruling. Individuals may either wait for disqualification proceedings in the courts or voluntarily disqualify themselves to avoid court proceedings. Disqualification proceedings may be commenced by the Insolvency Service, Companies House, the Office of Fair Trading, a company insolvency practitioner, or the courts.

Disqualification Period

Disqualification must be made within two years of the first date of a company's insolvency unless a court exemption is sought. If a company director is disqualified, the period of disqualification may be for up to 15 years. During this time, the disqualified individual may not serve as a director for any company registered in the United Kingdom or an overseas business with connections to the UK. They are also not permitted to be involved directly or indirectly in the formation, marketing or running of a company. A disqualified director is also not allowed to sit on any board for a charity, social care body, school or police authority, or a health board. They are also not permitted to become a pension trustee, solicitor, barrister, accountant or registered social landlord.

Disqualified Directors Register

Any person who has been disqualified as a company director through a court order or the Insolvency Service must be registered with the Disqualified Directors Register. The free, online registry includes the amount of time the person has been disqualified and the terms of the disqualification as per the Company Directors Disqualification Act. The register is maintained by Companies House on behalf of the Secretary of State, which is required by law to maintain a registry of disqualified directors.