Disqualification Of A Director

Directors of limited companies have a duty to act in the best interests of the company at all times.

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By Matt Spencer - 28th July 2021

A company director who fails to act in the best interests of the company can be disqualified for up to 15 years. Breaching a disqualification order or undertaking can result in up to two years’ imprisonment.

Directors of limited companies have a duty to act in the best interests of the company at all times. In practical terms, this entails several responsibilities, including:

  • Ensuring all company records are kept up to date;
  • Reporting any significant changes to the company;
  • Ensuring all corporation tax is paid;
  • Generally acting in accordance with the company’s articles of association; and
  • Declaring to the company shareholders and other directors any interest they may have in a transaction or proposed transaction which the company is a party to.

A failure to abide by the above requirements may result in the director being disqualified from their directorship. This may last for a short period or, in the event of a very serious breach, permanent disqualification.

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What actions could lead to a director disqualification?

Anyone may report the conduct of a company director if they believe their behaviour to be unfit. Examples of unfit conduct include:

  • Using company money or assets owned by the company to their personal gain;
  • Failing to stop the company trading in the event that the company is unable to pay its debts;
  • Failing to keep the company records up to date;
  • Failing to send accounting information to Companies House; and
  • Failing to pay corporation tax owed by the company.

A person is also unable to act as a company director if they are bankrupt, or if they are subject to a debt relief order, a bankruptcy restrictions order or a debt restrictions order. An individual may be reported for acting as a director in these circumstances.

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Breaching a director disqualification order or undertaking

If a person has been disqualified from acting as a company director and continues to do so, then they may be subject to more severe consequences, such as fines and criminal charges. Examples of conduct which is forbidden for someone who is disqualified as a director include:

  • Acting as a director of a limited company without express permission from the court;
  • Acting as an insolvency practitioner;
  • Assisting with the formation of a company or the promotion of that company without express permission from the court; and
  • Contravening any other restriction which may be incorporated into their ban.

In line with sentencing guidelines, any person who is disqualified from acting as a director and is found to be engaging in any of the above activities may receive a maximum sentence of two years’ imprisonment.

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Director disqualification can have serious repercussions, especially if acting as a director is your main income source. If director disqualification proceedings have been started against you, it is essential to get expert legal advice. At Aticus Law, we can advise how best to handle the situation.

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