Director disqualification is a legal procedure in the UK that can significantly impact an individual's career and financial future. Governed by the Company Directors Disqualification Act 1986 (CDDA), disqualification bars an individual from being involved in the management, promotion, or formation of any UK company for a set period, typically ranging from 2 to 15 years.
It is a serious matter with long-term professional and financial repercussions.
Whether you are facing disqualification or seeking advice on how to navigate the process, speak to us. We can provide specialist guidance on defending claims, negotiating settlements, and mitigating the impact on your future business activities.
Grounds for Disqualification
Directors may face disqualification for several types of misconduct. Common grounds include:
Wrongful trading - continuing to trade while the company is insolvent.
Failure to file company documents - neglecting to file accounts or returns with Companies House.
Misappropriation of company assets - using company funds for personal use.
Tax evasion - failing to pay taxes owed to HMRC.
Fraud - engaging in fraudulent activities such as Bounce Back Loan abuse.
The Process
It usually begins with an investigation by the Insolvency Service following a company’s insolvency, or in response to complaints received.
A director will receive a Section 16 letter, which outlines the allegations and the intended disqualification period.
The director may choose to contest the allegations in Court or accept a voluntary disqualification undertaking, which will end the Court action but carries the same consequences as a court order.
Consequences of Disqualification
The consequences of disqualification can be severe, such as:
Career impact - being disqualified means you cannot act as a company director or manage a company during the ban. This may severely limit future business opportunities.
Personal liability - in some cases, disqualified directors may be held personally liable for company debts, especially if their misconduct contributed to financial losses.
Compensation orders - directors may be ordered to compensate creditors for losses caused by their misconduct. The amount is typically based on the director's actions leading up to insolvency.
Legal advice and defence
If you are facing disqualification, it is essential to seek expert legal advice immediately. As specialist lawyers, we can help:
Review the allegations assessing the strength of the case and gather evidence to challenge the claims.
In some cases, it may be possible to negotiate a voluntary disqualification undertaking or reach a settlement before proceedings begin.
If disqualification is inevitable, we can help you apply for Court permission to continue acting as a director in specific circumstances, especially if your ongoing involvement in a company is crucial.
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