Director Disqualification Solicitors

If you fail to comply with your legal obligations as a company director, the Secretary of State (the Insolvency Service) can bring director disqualification proceedings against you under the Company Directors Disqualification Act 1986.

If unsuccessful, you could be disqualified for up to a period of 15 years. Further, if you breach the terms of your disqualification, you could be fined or sent to prison for up to two years.

Summit Law specialises in defending director disqualification claims. Over the past 20 years, we have successfully persuaded the Insolvency Service to withdraw court proceedings against our clients across a range of industries, including construction, media, and public relations.

Even if you have only received an initial letter or phone call from the Insolvency Service, it is important that you contact us straightaway.

What is unfit conduct for a company director?

In the first instance, the Secretary of State will need to identity the areas of investigation into your conduct as a director. Common examples of misconduct leading to director disqualification include causing or permitting a company to trade to the detriment of HMRC, fraud, wrongful and fraudulent trading and criminal acts.

The following factors will be taken into account in determining unfitness in director disqualification proceedings (Schedule 1, Company Directors Disqualification Act 1986):

  1. Any misfeasance or breach of any fiduciary duty by the director in relation to a company or overseas company;
  2. Any material breach of any legislative or other obligation of the director which applies as a result of being a director of a company or overseas company.
  3. The frequency of conduct of the director which falls within the above.

In the event that director disqualification proceedings are issued, the court will essentially consider a three stage test:

  1. Do the matters relied on amount to misconduct?
  2. If they do, do they justify a finding of unfitness?
  3. If they do, what period of disqualification is appropriate?

How can a company director be disqualified?

Where a company enters into any form of insolvency proceedings, the conduct of a director leading up to the insolvency will be reviewed and the investigation may result in a recommendation to the Secretary of State to issue director disqualification proceedings.

The most common method for a director to be disqualified is under section 6 of the Company Directors Disqualification Act 1986 for “unfit conduct”. The burden of proof rests upon the Secretary of State to establish that a director’s conduct is such that he ought to be disqualified. The standard of proof is the usual civil standard of balance of probabilities.

Alternatively, in appropriate circumstances, you may wish to consider offering a disqualification undertaking. This does not result in any finding by the court as to conduct, but, in deciding whether or not to accept an undertaking, the Secretary of State usually insists that a schedule of unfit conduct, that is, matters which are admitted for the purpose of the undertaking and any consequential purposes (such as seeking permission from the court to act as a director) is prepared.

If you agree a disqualification undertaking before disqualification proceedings are issued, you are unlikely to have to meet any costs incurred by the Secretary of State in investigating the claim and preparing the documentation in support of the proceedings.

A further advantage is that if you give a disqualification undertaking, there is a procedure (not dissimilar to the procedure under which permission to act as a director is sought) whereby you can apply at a later date to have the period of the undertaking reduced or for the undertaking to cease to have effect.

What if I need to continue acting in my capacity as a director? 

It may be possible for you to protect yourself against the possible breach of a disqualification order or disqualification undertaking by seeking permission of the court to act in any of the activities which are prohibited. The court will have regard to the following principles:

(1) If you wish to be a director of a company or be concerned in the management, the court will have to be satisfied that there is a real need for you to be a director of that company or be involved in its management. To satisfy the court, you will have to show firstly why, if at all, the businesses in relation to which you are seeking to be a director or to act in the management of the company cannot be carried on without the benefit of limited liability and secondly why, if the business cannot be so carried on, it is necessary for you (as opposed to some other person) to be a director. This will be looked at from the company’s point of view, not yours. A wish on your behalf to be a director or to be concerned in the management will usually not be sufficient.

(2) The court will need to obtain sufficient safeguards from you (these would either be obtained in the form of undertakings from you or be required as conditions attaching to the grant of the order for leave) that the acts complained of against you will not arise in the future. You may, depending on the allegations made against you, expect the court to require you to provide the following safeguards:

A. That cheques or financial agreements on behalf of the company should not be signed by you alone;

B. Any amount owed by the company to you should not be repaid unless all creditors are paid first;

C. All monies to HMRC will be paid monthly on time;

D. There should be adequate safeguards for the filing of returns and accounts on time.  

Can disqualified directors be shareholders?

If a disqualification order is made against you or if you give a disqualification undertaking, it means that you:-

(1) Cannot be a director of a company, act as a receiver of a company’s property, or in any way, either directly or indirectly, be concerned or take part in the promotion, formation or management of a company for the period of years laid down by the court or in the undertaking unless (in each case) you have leave of the court.

The above wording has been interpreted in the widest possible manner by the courts and applies to all types of directors (including shadow directors, de-facto directors and non-executive directors). Accordingly, shareholders should be aware of their role and responsibilities within a company and cautious not to become involved with the day to day management of the company if they wish to avoid being subject to the disqualification regime. 

Why choose Summit Law LLP for director disqualification proceedings?

Our specialist director disqualification solicitors at Summit Law has a wealth of experience in:

  1. Advising clients whether their conduct may amount to unfitness;
  2. Preparing clients for preliminary interviews with the Insolvency Service, including carrying out mock interviews;
  3. Attending preliminary interviews with the Insolvency Service;
  4. Successfully persuading the Insolvency Service not to submit a recommendation to the Secretary of State that proceedings be issued;
  5. Successfully defending director disqualification proceedings.

Our director disqualification defence fees

We offer an initial letter of advice in relation to the director disqualification regime generally for a competitive fixed fee of £800 plus VAT. Should you require anything beyond this, please get in touch with our specialist team today who can provide tailored fixed fee estimates.

Contact our director disqualification solicitors

For more information, please contact our specialist director disqualification solicitors today on jb@summitlawllp.co.uk or ac@summitlawllp.co.uk or 020 7467 3980. At Summit Law, we take a pro-active approach and can provide advice at any and every stage in director disqualification proceedings.