What Is A Directors Disqualification Order And How Could It Affect You?

by Tim Bishop on April 20, 2014

Getting a Directors Disqualification Order can be one of the worst things to happen to your business – and to yourself as an individual. But what do you have to do in order to be disqualified? What are the consequences? And what should you do if you find yourself in this stressful situation? Here’s a brief guide to Disqualification Orders and how they could affect you and your company.

What Is A Directors Disqualification Order?

A Disqualification Order is made under the Company Directors Disqualification Act 1986 and can apply to actual directors of a company as well as people who have carried out the functions of a director even if they aren’t actually listed as being one. It can have many serious and negative consequences, from banning an individual from being a company director entirely, and even leading to actual prison sentence in some circumstances (if a disqualified director breaches the rules of their disqualification). There are also Disqualification Undertakings which were introduced in 2001; these are the administrative equivalent of Disqualification Orders which don’t involve court proceedings.

When Does A Directors Disqualification Order Apply?

Being disqualified as a company director can be the result of all kinds of errors, from failing to keep accurate accounts and company records to ignoring your duties to Companies House. Generally, you can be disqualified from being a director if either a member of the public or an insolvency practitioner reports you for unfit conduct. As well as keeping poor records and not sending returns to Companies House, this can include not paying tax which the company owes, using company money for personal gain, and allowing the company to continue trading when it has debts that it can’t pay off. If this is the case, the Insolvency Service will let you know in writing that they are intending to start the disqualification process.

What Are The Usual Outcomes Of A Directors Disqualification Order?

This very much depends on each individual case, but the consequences of being disqualified as a company director could be devastating. For example, you could be banned from being the director of any company (both in the UK and abroad if the company in question has connections with the UK) for 2 to 15 years, and it could even result in a prison sentence if you break the terms of your disqualification, so you need to be completely aware of what the disqualification means for you. For the duration of your disqualification, you will be listed on Companies House’s database of disqualified directors, but it is possible to ask for court permission if you wish to start as a company director again during your disqualification period – you will need to seek legal advice to see if this would be possible or not.

Getting Specialist Legal Help

If you think you may be about to be disqualified as a company director, it is absolutely vital that you seek the services of a specialist solicitor straight away. An expert lawyer will be able to tell you your rights as well as being able to guide you through whatever may come next. This includes drafting a response to the Insolvency Service, organising a defence to the order, and negotiating a Disqualification Undertaking. Without an experienced solicitor on your side, you may find that the consequences of a Disqualification Order could be even worse than you expect.

Tim Bishop is senior partner of business law solicitors Bonallack and Bishop. For more information about the disqualification of a director, call them on 01722 422300 or visit their specialist website at http://www.disqualified-directors.co.uk.

Tim Bishop
Having qualified as a Solicitor in 1986, Tim Bishop is a legal entrepreneur who owns leading law firm Bonallack & Bishop Solicitors. Find out why you should choose Bonallack & Bishop Solicitors: Visit www.bishopslaw.co.uk.
Tim Bishop

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