Consequences of Disqualification

The purpose of disqualifying Directors is to prevent any repetition of similar behaviour, solely to protect the general public from facing such risks.   Whilst this will not protect all risks companies pose to society, it assists in mitigating the risk that comes with limited liability and the limited regulation of Director’s conduct.

Where a Director has been disqualified by Court Order or by offering a Disqualification Undertaking then they are prohibited from acting in the management of a limited liability company or partnership, unless they have obtained Leave to Act from the Court.

For many individuals, disqualification as a Director will have only a limited impact on their lives – many will return to employed work, may set up an unincorporated business (which can also be done through an unincorporated partnership) or it may just be a good time to retire.

However, in recent years the UK government has increasingly supported legislative efforts to ensure that all Directors of limited companies are transparent in their dealings and, if they are not, may be personally liable for any misconduct or failure to act in accordance with accepted standards of behaviour.

Personal liability for Damages

In addition to a prohibition on acting as a Director or in the management of a limited company, a Director faces others risks when being disqualified by undertaking or Court Order as follows:

  1. Liability to Liquidator

Where a Director is disqualified on the grounds of misconduct which caused losses to the company, such losses may also be claimable by the Liquidator on the Company’s behalf.  It is often the case that a Director accepts a Disqualification Undertaking to avoid the Secretary of State’s legal costs, only to be faced by a much higher (and more costly) legal claim by a Liquidator, which is not so easy to avoid.

  1. Compensation Order

As a result of legislation introduced in 2015, Directors who are disqualified from acting as a Director will then be subject to a strict liability for the damages allegedly caused by such misconduct.

For more information on such Compensation Orders, please click here.

For more information on such risks, particularly when entering into a Disqualification Undertaking please click here.

Direct Consequences of being disqualified

Once a Director is disqualified, there are other more direct real life changes that will affect his/her personal and business life, including any claims they may face by individual creditors.

We set out below a summary of such other direct consequences and please visit the relevant webpages which addresses such concerns:

  1. Restrictions imposed by Disqualification
  2. Credit rating/current business interests
  3. Potential criminal proceedings
  4. Section 15: personal liability for company debts

Provide a Director is comfortable with such risks, then being disqualified should have a minimal affect.

However, if any of the above potential consequences do raise concerns then at Francis Wilks & Jones we can assist in navigating you to a more risk-free destination.  We have considerable experience of Director Disqualification proceedings and advising Directors on the benefits and risks of being disqualified and the steps you may take to best limit such consequences.

Please call any member of our Director Services Team for your free consultation now on 0207 841 0390. Alternatively email us with your query at info@franciswilksandjones.co.uk and we will call you back at a time convenient for you.