How can a director be disqualified as a company director?

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • How can a director be disqualified as a company director?
  • Company Directors Disqualification Act 1986
  • CDDA 1986, s 6—misconduct
  • CDDA 1986, ss 2–5—in the context of criminal proceedings
  • CDDA 1986, s 2—when convicted of an indictable offence
  • CDDA 1986, s 3—breach of companies legislation
  • CDDA 1986, s 4—when fraudulently trading
  • CDDA 1986, s 5—default in accounts and returns
  • CDDA 1986, s 8—following investigation of the company
  • CDDA 1986, ss 9A–9E—in the context of competition
  • More...

How can a director be disqualified as a company director?

STOP PRESS: In May 2021 the government announced that the Insolvency Service will be given the power to investigate directors of companies that have been dissolved. This is designed to close a legal loophole and act as a strong deterrent against the misuse of the dissolution process. Currently, the Insolvency Service only has powers to investigate directors of live companies or those entering a form of insolvency.

For further reading, see:

  1. Insolvency Service to get new power to investigate dissolved company directors, LNB News 12/05/2021 101

  2. Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill, LNB News 13/05/2021 10

  3. Insolvency Service targets debt-dodging bosses of firms hit by COVID-19

There are various ways in which a director can be disqualified from acting as a director of a limited liability company. The most common of these is to be disqualified for 'unfit conduct' as a director of an insolvent company under section 6 of the Company Directors Disqualification Act 1986 (CDDA 1986).

However, there are various other, less common, sections found in CDDA 1986 and the Insolvency Act 1986 (IA 1986) which allow for the disqualification of a company director.

Whatever enactment is used to disqualify a director, the consequences to a disqualified person is generally the same and is set out in further detail in Practice Note: What is prohibited

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