Consequences of Director Disqualification

The consequences of director disqualification can be catastrophic, particularly if you are a director of another company or companies which are your livelihood.

The making of a disqualification order does not mean that you have been convicted of a criminal offence. It simply means that the facts and matters alleged against you concerning your conduct have been sufficiently established for you to be disqualified from, among other things, being a company director or from being concerned in the promotion, formation or management of a company for a set number of years laid down by the court.

Proof of disqualification

a) the top bracket: 11 to 15 years. This should be reserved for particularly serious cases, which may include for example, when a director has been previously disqualified or where fraud is involved.

b) the middle bracket: 6 to 10 years. The middle bracket should apply for serious cases that do not merit the top bracket.

c) the lower bracket: 2–5 years. This bracket should be applied where the case is relatively not very serious.

We have experience dealing with disqualification claims brought on the above grounds (alongside various others). If any allegations of misconduct have been made against you, we recommend that you get in touch with our director disqualification specialist solicitors today for further advice.

What you can and cannot do

The making of a disqualification order means that you cannot act as an insolvency practitioner (there being no ability to obtain leave of the court so to act). A disqualification order may also affect your future position with government departments such as, for instance, you may not be able to obtain various DTI grants for any future business. Your ability to become involved in certain other capacities (such as trustee of a charity) will also be affected by a disqualification order.

Acting in any type of management would be a breach of the order or undertaking. What you might consider does not amount to management may in fact be quite the converse. If a disqualification order is made against you and you are in any way concerned that any activity which you are currently undertaking may amount to a breach of that order because it amounts to management, it may be necessary for you to protect yourself by making an application for the court’s permission for you to continue acting as a director. This is commonly known as an application for leave.

Can a disqualified director be an employee?

A disqualification order does not mean that you cannot continue as an employee of a company.

Can a disqualified director continue managing the company?

You cannot be involved in the management of the company or be acting as what is known as a shadow director. A shadow director is a person in accordance with whose instructions the directors of a company are accustomed to act but who is not formally registered as a director at Companies House.

Can a disqualified director be a shareholder?

Further, a disqualification order does not prevent you from having a shareholding in a company. Shareholders must however be cautious so as not to overstep their role as a shareholder into the day-to-day management of the business.

Contact Summit Law today

Our commercial team have a wealth of experience in defending director disqualification claims and regularly assist clients at every stage of the process. For proactive advice and representation, contact our director disqualification lawyers today.