When can a Director be disqualified from acting as a Director?

This is covered by the Company Directors Disqualification Act 1986. There are provisions dealing with the consequences of a conviction for an indictable offence (i.e. an offence tried at the Crown Court only.) This relates to offences directly connected with the promotion or management of a Company but there is also provision for a Court to impose disqualification if it wishes where there has been a finding of fraudulent trading, any other fraud or a breach of duty in relation to the Company. In practice a liquidator will bring proceedings against a Director for breach of fiduciary duty and/or misfeasance whereupon he will in due course look, if found at fault, to bring Disqualification proceedings.

A Disqualification Order can also be made where there has been a failure to comply with the provisions of the Companies Act. This includes and refers to the failure to produce documents and returns to the Registrar of Companies.

An Application can also be made to the Court by the Secretary of State, the Official Receiver or liquidator. The Court is then asked to consider whether a Director is a fit person to be concerned in the management of a Company in the light of the allegations against him. The Court can impose a period of disqualification of not more than 15 years.

It should be noted that once an individual person is made personally bankrupt, he must not act as a Director until discharged from his bankruptcy, and without any relevant bankruptcy restriction affecting him. This disqualification is automatic and the automatic discharge will generally be 12 months after the bankruptcy Order was made.

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