The role of a company director comes attached with a number of obligations to behave and act in ways that agree with the company policies. Any deviation from these set norms can be deemed ‘unfit conduct’ by the company. This can lead to penalties or even termination of the director depending on the severity of the issue.
According to the Company Directors Disqualification Act, 1986, the following can be considered “unfit conduct”-
- Failing to pay the tax liabilities of the company
- Improper accounting records
- Continuing to trade when the company is in a state of insolvency
- Misusing company funds for personal use
- Failing to comply with the requests of the insolvency practitioner
When your company is declared as insolvent, the Insolvency Practitioner is required to file a report accordingly. This report is sent to the Secretary of State for Business, Innovation and Skills, who will then review it. If it is necessary to take further action in the interest of the general public, they will begin the process of disqualification.
You are entitled to take the necessary steps once the court action begins by fighting the case legally. Alternatively, you could wait for the Disqualification Order from the court, which could take up to two years since the court proceedings begin. You could also agree to a ‘disqualification undertaking’, where you disqualify yourself, thereby putting an end to the court proceedings.
What happens if you are disqualified?
Director disqualifications can seriously hamper your prospects of heading any other company for a stipulated period of time, as mandated by the courts. Essentially, you are incapable of becoming the director of any UK based company or a foreign company which has connections in the UK.
You can play no part in forming or running a company, or its promotions. Essentially you are barred from taking any executive decisions such as hiring staff, overseeing the financial aspects of the company, etc. You will not even be able to guide a third party in running a company, and doing so will lead to the prosecution of you and the third party.
As a disqualified director, you can apply to the courts to allow you to act as a company director again, as per The Company Directors Disqualification Act, as long as you have strong reasons to do so. However, being disqualified does not prevent you from working as an employee at the same company; but you will have to be careful in how you are represented within the company and your job roles. You are also allowed to be a sole trader for the firm, or join a partnership, but it cannot be a limited liability partnership. Failing to adhere to these court mandates is a criminal offense which will attract a hefty prison sentence and an extension on your disqualification period.
Being unsure of director disqualification and what it means can result in a lot of unwarranted stress. When faced with disqualification proceedings it is recommended to seek the advice of reliable advocates from Neil Davies & Partners Solicitors before moving forward.