The recent cases show that those directors who have misused BBLS are being targeted for relatively high periods of disqualification.
The effects of disqualification can be quite devastating for those owner managed businesses where, to all intents and purposes, the director involved is the business and in his or her absence, the company and its employees are at risk.
Once a disqualification order is made, the Secretary of State issues a press release, which may be picked up by any press, although this would usually be a publication local to the former director unless the matter is particularly high profile.
This adverse publicity for the former director is intended to serve both as a deterrent to others, and as a warning to anyone who may have dealings with the director that they are disqualified.
Any director who is disqualified by whatever provision will have their name included on a central Register of Company Directors, which is available to the public at Companies House and at the Insolvency Service website and is searchable by the public.
Unless they have court permission, the person is disqualified under the Company Directors Disqualification Act 1986 (“CDDA”) for the period stated in the order or undertaking from:
- acting as a director of a company;
- taking part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership; and
- being a receiver of a company’s property
That person also cannot act as an insolvency practitioner.
A disqualified director cannot, therefore, simply resign as a director, have a family member or friend appointed in their place (whilst continuing to run the company from the shadows (shadow director), or carry on running the company themselves.
As well as the prohibitions and restrictions under the CDDA, restrictions can arise under other statutes or rules of organisations.
Acting as a director while disqualified is a criminal offence, and may also make the individual concerned personally liable for company debts. An undischarged bankrupt is also automatically disqualified from being a director, and it is an offence for him to act as a director.
In certain circumstances, it might be possible to provide mitigating circumstances to the Insolvency Service with a view to reducing the level of disqualification sought.
Alternatively, there might also the option of making an application for permission to act as a director despite disqualification under Section 17 of the Company Directors Disqualification Act 1986 and subject to a set of conditions to be agreed with the Insolvency Service.
Directors Disqualification is a minefield for those unfamiliar with the law and also the practices of the Insolvency Service.
It is all too easy to get bogged down in the detail. Detail is important but not always relevant all depending on what the objective is (i.e. agreeing an Undertaking, supplying mitigating circumstances in an attempt to reduce the proposed disqualification period, defending proceedings or making an application for permission to act as a director) and it is not difficult to end up in the all too familiar space of being unable to see the wood for the trees.
Please take advice early, whether it is in relation to your duties as a director, concerns you may have in relation to your company’s financial affairs or when you have been contacted by the Insolvency Service to alert you of the possibility of disqualification proceedings being brought against you.
We can help with all of this quickly and efficiently from responding to a Directors’ Questionnaire to defending disqualification proceedings and everything in-between.