HomeCase studiesSMEs, directors & shareholdersDirector servicesAssisting a disqualified director wanting to obtaining shares in a company

Why the client needed our help

Our client had been disqualified from acting as a director of a limited company back in 2013 and was only due to be able to act again in that capacity in 2027. While this directly prohibited his ability to become a director of a limited company, our client wondered whether he was able to take a 100% shareholding in a company. He sought our advice in respect of the same.

How we helped

The problem we identified for our client is that, in accordance with section 22 of the Company Directors Disqualification Act 1986, a ‘Director’ is defined very widely. It may be the case that by taking a 100% ownership in a company, our client could be breaching his disqualification order by ‘taking part, directly or indirectly, in the promotion, formation or management of a limited liability company’. He was correct, therefore, to seek our advice on the matter.

The outcome

In a comprehensive letter of advice, we set out the following for our client:

  1. A summary of the applicable law relating to a disqualified director.
  2. Practical considerations that our client should take into account if he decided to move forward with this acquisition of the company’s shares (on the basis of his disqualification).
  3. The potential risks and consequences of taking sole ownership of the company.
  4. Consideration as to the risk of breaching the disqualification undertaking and, falling foul of any restrictions or prohibitions, whether it is safe to continue with the acquisition of the shares of the company.
  5. Our wholesale advice on the situation.

Ultimately, our client decided not to move forward with the acquisition of the shares on the basis that there was a heightened risk of fouling the provisions of his undertaking and that he did not want the potential financial or criminal liabilities that could follow on from this.

Supportive and friendly with partner-led involvement, I would recommend Francis Wilks & Jones to anyone facing a similar situation.

A client we helped achieve a successful outcome

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