As a rule, you cannot be a company director if you are already declared bankrupt or under a debt relief order. You have to wait until your disqualification ends. For this purpose, the provisions for directors disqualification is contained in the Company Directors Disqualification Act 1986.
First and foremost, the Company Directors Disqualification Act 1986 is introduced to stop incompetent or unscrupulous individuals from leading and managing companies for a period of time with the intention to abuse the law.
For this purpose, the Secretary of State maintains the Register of directors Disqualification Orders and it is open for public inspection.
Concurrently, you may also search Companies House database of disqualified directors. All you have to do is “search the register” by entering the company name, number or officer name. If the person is disqualified, you would see the word “Disqualified” next to the birth date under his/her name.
On the other hand, Companies House would automatically remove the director’s details from the database when his/her disqualification expired. Accordingly, the record is updated weekly.
Universally, you can be disqualified from being a company director if your conduct is deemed unfit. For this purpose, unfit conduct include the following.
- You allow your company to trade even when you know your company cannot pay its debts.
- Intentionally not keeping proper accounting records.
- Deliberately not deliver your company accounts and confirmation statement to Companies House.
- Not paying your company taxes to HM Revenue and Customs.
- Use your company’s money and assets for personal benefits.
Circumstances lead to director disqualification
Generally, you would be disqualified and banned from being a director if you are guilty and convicted of the offences.
- On conviction for an offence connected with promotion, formation, management or liquidation of the company.
- The company continued to trade with intent to defraud creditors (suppliers) even in the process of winding up.
- Guilty of fraud in relation to the company.
- For non-compliance with the Companies Act with persistent default that is at least three offences within five years.
Length of disqualification
Generally, you can be disqualified for up to 15 years. The court has the discretion whether or not to make the order. It must, however, disqualify a director whose conduct in relation to the company, alone or together with his conduct as a director of another company, make him in the court’s opinion, unfit to be concerned in the management of a company.
In the event you are disqualified as a director, you are still jointly and severally liable for the debts of your company. Without reservation, the liability extends to anyone acting on your instructions.
Furthermore, once you are disqualified from being a director, you would not be able to take on the following responsibilities.
- Not allowed to sit on the board of a charity, school or police authority.
- unfit to be a pension trustee.
- Cannot be a registered social landlord.
- Banned to sit on a health board or social care body.
- If you are a solicitor, barrister or accountant, your professional bodies will remove you and you no longer able to continue your practice in your profession.
How director disqualification works
Commonly, you can be disqualified from being a director by the following bodies. Either of them can make an application to have you being disqualified.
- The Insolvency Service
- Companies House
- The Competition and Market Authority (CMA)
- The Courts
- A company insolvency practitioner.