If you’re disqualified as a director, then you cannot be a director of a UK company, or a company that has links to the UK. You also cannot be involved in the formation, running or marketing of a company. There are some additional restrictions too. For example, you cannot practice as a solicitor, barrister or accountant.
Contravening a director disqualification is a criminal offence and can result in imprisonment.
What are the consequences if a director becomes disqualified?
A director can be disqualified for ‘unfit conduct’. The disqualification can last for up to 15 years. The minimum term is two years. While you are serving your disqualification, there are various things you are not allowed to do. If you break the rules, you could be fined and sent to prison.
So, what is the effect of a director disqualification? Here’s what you’re not allowed to do…
- Cannot act as a director
Firstly, you cannot be a director for any registered or unregistered company in the UK, or an overseas company that has links to the UK. A company might be considered to have links to the UK if it:
- Is registered in the UK
- Has assets in the UK
- Carries on business in the UK
You also cannot act as a company director but in a different guise. In other words, you cannot assume a different title but continue to perform director duties. Nor can you appoint a ‘puppet’ director who is acting under your instructions.
- Cannot be involved in the running of a company
Secondly, you cannot take part, directly or indirectly, in the creation of a new company. Nor can you promote or manage a company. This is to ensure that you do not simply change your job title and continue with your former role. This means you cannot do things like:
- Order, pay or negotiate with suppliers or businesses
- Rent or buy business premises
- Hire or dismiss employees
- Manage the company bank account
- Act as a management consultation
- Occupy a governing role in the company
- Make executive decisions regarding the company’s affairs
- Raise capital for a new company
- Be involved in any stage of incorporating a company
This is not an exhaustive list.
- Further restrictions
Thirdly, there are additional restrictions imposed on those serving a director disqualification. You cannot:
- Be a charity trustee
- Be a school governor, a temporary school governor or a member of a foundation body
- Be a pension trustee
- Be a member of a police authority
- Be a director, trustee or committee member of a housing association/registered social landlord
- Sit on health boards or social care bodies
- Practice as a solicitor, barrister or accountant
- Act as an insolvency practitioner
- Be a receiver of a company’s property
What happens if I breach a director disqualification?
If you are serving a director disqualification and you breach the terms of the order or undertaking, then the Insolvency Service may take further action against you. This could result in a fine and up to two years’ imprisonment. You may also become personally liable for any debts the company accrues while you are breaching your director disqualification. If you cause a creditor any kind of harm or loss, then a Compensation Order may be issued.
If you get someone else to manage a company under your instructions, then that person could also be prosecuted and face the same penalties.
How long does the restrictions last?
The restrictions imposed on you end after you have served the length of your director disqualification. Director disqualifications can last from two years up to 15 years. If you want to perform any of the roles or duties that are banned, then you must get leave to act from the court.
Can I get permission to act as a director?
If you want to act as a director while serving your disqualification, or you want to perform any of the duties/roles you are currently exempt from, then you need to get permission. For the most part, this permission must be obtained from the court.
To get leave to act as a director, or to take part in the promotion, formation or management of a company, you must submit an application under section 17 of the Company Directors Disqualification Act. The court must be satisfied that you have reasonable grounds for making this request.
In certain circumstances, permission must be sought from other authorities. For instance, if you want to act as a trustee for an unincorporated charity, consent must be obtained from the Charity Commission. Similarly, disqualified directors who want to be pension trustees must get leave from the Pensions Regulator.
What can I do as a disqualified director?
Even if you are disqualified as a director, you are still allowed to be company secretary and be a shareholder. You can also get a job at a company, so long as you do not carry out any director duties.
In addition, you are allowed to carry on business as a sole trader or partnership. However, you cannot promote, form or manage a limited liability partnership without the court’s permission.
Get expert legal advice
If the Insolvency Service is currently taking action against you as a director, we can help. We offer expert legal support to directors facing disqualification. We can advise you on how to get the best possible outcome.
If you have already been disqualified, we can also help you get leave to act from the court. Permission will only be granted if you have good reason for your request. We can assess your eligibility and make representations to the court on your behalf.