Whatever stage of the disqualification process you are in, it is vital to avoid making mistakes which can end up having significant consequences later on - potentially damaging career prospects or leading to personal money claims against you. Our team has been successfully dealing with disqualification claims since 2002. Let us help you.
I was delighted by the work done by the team at FWJ and cannot recommend them highly enough. Their legal and tactical knowledge was spot on. I can now continue to grow my business free from the worry of my original disqualification
A director we defended against a disqualification claim
Once an individual is subject to disqualification by way of a disqualification order or a disqualification undertaking then the legislation provides that:
“(a) he shall not be a director of a company act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has leave of the court, and
(b) he shall not act as an insolvency practitioner.”
The above applies to any
- company;
- limited liability partnership;
- building society;
- friendly society; and
- other charitable organisations.
In certain circumstances, the disqualification may extend to an overseas company with “sufficient connection” with the UK.
All references below apply equally to these types of organisation.
What a disqualification does not prohibit
If an individual is disqualified, it does not prevent them from acting as an employee of the company – even if that role is in a relatively senior or specialist/professional capacity. The true test is whether the individual is:
- seeking to act as shadow or de facto director of a company; or
- seeking to act in the management of a company.
If neither of the above apply, then a disqualification will have no effect on your employed role. Equally, a disqualification does not prevent an individual from holding investments and a shareholding in any company (private or listed) although that individual should ensure that they do not overstep their role as shareholder (and not owner-manager, which is often an error we see).
Please click here for more discussion on such risks.
Restrictions on management
A disqualification undertaking or order will have an identical effect – to prevent the individual subject to this contract from acting in any of the capacities as described above.
- for a small company which may have few management personnel – particularly where there is one main director who is now subject to a disqualification – then this may have a catastrophic effect;
- for larger companies, or smaller companies where a third party can take over the management and direction of the company, this risk is not so severe and the disqualified director can either alter the nature of their role or cease acting.
However, it is important that – as commonly occurs – the director does not merely register a replacement at Companies House (for example a spouse) and then continue acting through that individual.
The risk of prosecution in such circumstances is pronounced and very likely.
Restrictions on professional organisations
Other rules may apply where an individual is disqualified and either they or their new business is operating in a regulated sector – for example financial services, accountancy or even the law.
In such circumstances the regulatory body may reach decisions, and possibly even reject the individual/organisation, where the individual or a director has been disqualified.
Many clients commonly face such issues and thus it is important, when agreeing to be disqualified, to ensure all of the documentation is properly drafted.
Loss of clients
For some businesses, the profile of the company and its directors is of utmost important to the clientele and the disqualification of a director could have a consequence that the integrity of the company and its client are potentially questioned if that company is permitted to continue supplying goods or services.
These risks are common and we often see clients moving away from companies in certain sectors where such sensitivity exists.
For this reason it is vital that the disqualification itself is managed carefully and such risks considered well in advance.
At Francis Wilks & Jones we can assist in anticipating such problems and managing the outcomes (where being disqualified is a possibility) so as to cause the least inconvenience or disruption to you or your company. Call us today and our friendly team of experts can help.
FWJ exceeded my expectations by not only avoiding an order for my disqualification as a director but also negotiating a complete withdrawal of the prosecution. This has been such a relief and weight off my mind after many years and I am very grateful to them. I strongly recommend instructing them at the very earliest opportunity. Timely advice, realistic expectations, prioritisation and logical legal presentation were key.
A company director we successfully defended against a director disqualification claim by the Registrar of Companies
