Director disqualification FAQs

Director disqualification FAQs

All Director Disqualification

What is meant by director disqualification?

A disqualification order is made under the Company Directors Disqualification Act 1986 by the Court. The Act applies to a person who has been formally appointed as a director and so to someone who has carried out the functions of a director and to shadow directors.

What is a shadow director?

In the Insolvency Act 1986, a shadow director is defined as “a person in accordance with whose directions or instructions the directors of the company are accustomed to act”.

What is a de-facto (de facto) director?

A de-facto (de facto) director is a person who, whilst not registered as a director at Companies House, nonetheless performs the functions of a director – and is actually treated as a director.

The definition is an important one for the purposes of the Company Directors Disqualification Act 1986. This is because it is not only “registered” directors who are subject to the Act, but also de facto directors.

Why are disqualification proceedings being brought against me?

There are three main reasons why the Secretary of State for Business Innovation and Skills may have brought proceedings against you.

  1. If you are found to be guilty of misconduct in relation to a company, the Court can grant a disqualification order. This could happen for example if you have breached company legislation, e.g. you fail to file company returns or you lost or did not maintain company books and records.
  2. Other examples include fraudulent behaviour relating to the company’s affairs, especially if it is proved that you intended to defraud creditors or continued to trade when you should have known that the company was insolvent.
  3. Failure to cooperate with the Official Receiver or an Insolvency Practitioner or failure to submit tax returns or pay over to the Crown tax or other money due are other examples.

When does the disqualification occur?

When the company has failed, the Official Receiver or the Insolvency Practitioner, is obliged to send the Secretary of State a report on the conduct of the directors who were in office in the last 3 years of the company’s trading. The Secretary of State will then consider whether it is in the public interest to seek a disqualification order against you. It is important to appreciate that the Secretary of State makes the application to the Court for an order but it is the Court that will decide whether to grant it.

What is the timing of the disqualification proceedings?

You will usually be notified of a decision to apply for a disqualification order when the Insolvency Service Director Disqualification Unit sends you a notification. This will usually be to the last address you provide to Companies House or to the Official Receiver or relevant Insolvency Practitioner. The Secretary of State must then apply for disqualification within 2 years of the date of the winding-up order