HomeFWJ TakeawayClaims against directorsDirector disqualificationDirector Disqualification [2024 Guide]

Welcome to our free industry leading guide on Director Disqualification. We have successfully defended directors since 2002 and lead the legal sector in this area of the law. Call today for a free consultation.

Introduction to Director Disqualification

Director disqualification is a legal process whereby an individual is prohibited from acting as a director of a company.

The primary aim of the director disqualification regime is to protect the public from what went wrong before happening again. Normally when a company goes into liquidation, creditors and other parties are affected. Often HMRC is left being owed significant money at the time of liquidation. If this has been the result of poor conduct by the directors of the company concerned, the legislation is there to stop them becoming a director again for a set period of time.

The aim of the legislation is to ensure that only responsible and competent individuals manage companies.

There are various examples of misconduct which might give rise to a finding of unfitness under the terms of the legislation – and therefore lead to disqualification. We will cover these in more detail later in this guide, but they can include

  • Wrongful trading (continuing to do business when the company is insolvent),
  • Misappropriation of company assets (using company funds for personal use),
  • preferential treatment of creditors,
  • bounce back loan abuse,
  • failure to file company documents,
  • non payment of taxes; and
  • excessive pay

However, the rules in the Company Director Disqualification Act 1986 are complex and often directors are bounced by the Insolvency Service into agreeing to be disqualified when they have valid grounds to defend the claim.  Not only does there have to be misconduct which is serious enough to result in a finding of unfitness against the director, it also has to be in the public interest to disqualify the individual concerned. These are strict requirements for the Insolvency Service to meet.

Why is Director Disqualification important?

The director disqualification regime is seen as playing an important role in maintaining the integrity of the business environment in England & Wales. It is meant as a deterrent against bad behaviour by directors and ensuring that they adhere to high standards of conduct.

By removing unfit directors, the disqualification process is aimed at fostering increased trust and confidence in corporate governance. This, in turn, it is designed to protect creditors, investors and employees of businesses.

On one level, the importance of director disqualification can be highlighted by looking at recent statistics over the last few years:

YearTotal DisqualificationsAverage Length of Ban (Years)Common Reason for Disqualification
2021/228045.86Misappropriation of assets, wrongful trading
2022/239347.36Covid Scheme / Bounce Back Loan abuse (458 cases)
2023/2412168.40Covid Scheme / Bounce Back Loan abuse (831 cases)

Having said that, it can be seen from a different perspective.

There are an estimated 7.5 million directors in England & Wales. Corporate insolvencies are in the region of 20,000 a year.  When put in perspective, the numbers of people actually getting disqualified is very small although obviously not every director of an insolvent company was acting in an unfit way.  But the reality is that the chances of finding yourself on a receiving end of a claim is low.

Most disqualification in the last 2 years directly relate to Bounce Back Loan disqualification and abuse of the Covid loan scheme. It can strongly be argued that the Insolvency Service has been going for the “low hanging fruit” to keep their numbers up and ignoring the more traditional types of misconduct such as wrongful trading, trading to the detriment and other more serious offences.

But if you do find yourself in the firing line, then you should take advice and try and defend the claim. Being disqualified can have very important consequences, such as financial, reputational and the practical – not being able to act as a director or in the management of a company for the period of the director ban.

Recent years have shown a steady number of disqualification orders, although much of this is down to an increase in disqualifications due to abuses of the Covid Loan Bounce Back scheme. In some ways this has artificially altered the figures.

These statistics underscore that disqualifications are back now that the pandemic is over. And we are seeing more traditional grounds of misconduct being levelled at directors now that the glut of Covid and Bounce Back Loan claims have gone through the system. What is noticeable is the rise in the cases in the middle bracket (5-10 years) and higher bracket (11-15 years) in recent years – showing that the Insolvency Service have been seeking longer periods of disqualification than was previously the case.

Francis Wilks & Jones, with our deep expertise in this area, is committed to guiding and defending directors through this complex process.

Director Disqualification – a deeper dive

What does director disqualification mean?
What is the Company Directors Disqualification Act 1986?
FAQs

What are the grounds for director disqualification

Most common reasons for disqualification
Bounce back loan abuse statistics
Why would a director be disqualified?
FAQs

Disqualification proceedings and process

Introduction
What are the key stages in disqualification claims?
Variation or lifting of the disqualification
FAQs

Disqualification and voluntary undertakings

Introduction
What are voluntary undertakings?
Benefits of voluntary undertakings
Dangers of giving voluntary undertakings
Process of voluntary undertakings
Section 1A of the CDDA 1986: Undertakings
FAQs

Compensation orders

What are compensation orders
When can compensation orders be issued
Process of issuing compensation orders
Key statistics on compensation orders
Impact on directors of compensation orders
FAQs

Disqualification for Companies House offences

Magistrates Court disqualification
What are Companies House offences
Process of disqualification in the Magistrates’ court
Section 5 of the CDDA 1986: Summary conviction
Common Companies House offences leading to disqualification
Statistics on Companies House offences
The role of legal advisers
FAQs

Pre-litigation stages in disqualification claims

Initial inquiries from the Insolvency Service
Questionnaire stage
Pre-Section 16 stage
Section 16 letter
Post-Section 16 stage before issuing proceedings
FAQs

Mitigating the impact of disqualification

Introduction
Applying for court permission to act as a director despite disqualification
Application to set aside or vary a disqualification undertaking
FAQs

Directors Responsibilities – an overview

Directors have a duty to ensure that their companies comply with various statutory requirements. Failure to meet these obligations can lead to disqualification and other severe consequences. This section outlines key responsibilities and the importance of compliance.

Key statutory responsibilities of directors
The consequences of non-compliance
Importance of maintaining statutory compliance
Role of Francis Wilks & Jones
FAQs

Public Interest and Director Disqualification

What is meant by public interest?
Public interest winding up proceedings
Public Interest Winding Up Petitions and Disqualification
Common Reasons for Public Interest Disqualification
How our team can help
Statistics on Public Interest Winding Up Petitions and Disqualification
FAQs
What are the typical costs?
Funding options
Managing legal costs effectively
FAQs

Your common FAQ’s answered

Acting as a director whilst disqualified
What happens if a director is disqualified?
Can a disqualified director be a shareholder?
Can a disqualified director be a sole trader?
Can a disqualified director be a company secretary?
Can a disqualified director attend board meetings?
Can a disqualified director be a member of an LLP?
What is the impact of director disqualification on future business ventures?
Can a disqualified director start a new company?
What are the rehabilitation options for disqualified directors?
How does director disqualification affect international business activities?

Experts in Director Disqualification Law

Francis Wilks & Jones solicitors have been defending directors from disqualification since 2002. During that time we have helped 100’s of directors deal with their claims and get back on their feet. We have also helped them avoid financial penalties and associated liquidator claims.

The FWJ team includes

  • Stephen Downie is a partner and heads up our director disqualification team. Stephen is dual qualified as both a solicitor (with higher rights) and is a qualified accountant with particular expertise in complex accounting and tax matters. What differentiates Francis Wilks & Jones from other solicitors is that Stephen was previously an Insolvency Examiner within the Insolvency Service, an accountant working within Insolvency Practitioner firms investigating directors’ conduct and – following qualification as a solicitor in 2006 – Stephen spent 5 years as solicitor for the Secretary of State and Official Receivers, managing director disqualification claims.  For the last 10 years since joining Francis Wilks & Jones, Stephen has advised and assisted directors in defending director disqualification claims and getting them permission to continue acting as a director despite disqualification. 
  • Doug McEvoy is an associate at FWJ with a wide range of disqualification expertise, most recently defending many directors from Bounce Back Loan and tax allegations and getting permission for them to remain acting as directors.
  • Lefteris Kallou is an associate at FWJ and has successfully defended many disqualification claims and is experienced in section 17 permission applications

Other expertise for directors

In addition to the above experts, we have a dedicated team of other solicitors at FWJ with huge experience defending directors on a wide range of claims, including those from HMRC, liquidators, co directors and shareholders. We also advise regulalry on director duties. This means that we can always put together the right team for you – and maximise the chances of getting the permission from the court you need.

Absolutely excellent advice, service, professionalism and most importantly RESULTS! A sensitive case regarding disqualification was bought by the Secretary of State. After failed attempts with previous solicitor, Douglas literally saved the day and was able to secure a win for us. Highly recommended

A client facing a director disqualification

Key contacts

Stephen Downie

Stephen Downie

Partner

Douglas McEvoy

Douglas McEvoy

Associate

Anamitra Mukhopadhyay

Anamitra Mukhopadhyay

Solicitor

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Case studies

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