Director Disqualification Proceedings

Individuals may be disqualified from acting as a Director of a company either following the conclusion of criminal proceedings which relates to their role as Director, following proceedings brought by the Registrar of Companies for failures to file statutory documents at Companies House (for example financial accounts), matters relating to fraud and, automatically, where a Director or an individual is declared Bankrupt.

However, and most commonly, where a company is placed into insolvency then a Director may be disqualified for any misconduct found to be contrary to the Public Interest.

Options available to Directors

Where a Director is subject to investigations and a decision is made to seek that Director’s disqualification then the Director is normally provided notice of such a decision in writing pursuant to Section 16 Company Directors Disqualification Act 1986.

This letter will provide an opportunity to offer a disqualification undertaking which is a voluntary form of disqualification which enables the Director to avoid the legal costs incurred by his solicitors (and which they may be subject to, if unsuccessful) if he chose to defend the Disqualification Claim.

At this point the Insolvency Service, in the s.16 letter, will usually notify the Director as to whether they also face the risk of being subject to a Compensation Order [LINK TO 11] which would in any event undermine the purpose (for a majority of Directors) of offering a Disqualification Undertaking (i.e. to save money).

If a Disqualification Undertaking is offered, it may still be possible to act as a Director by seeking leave to act notwithstanding the disqualification.

If however you have a defence to the Disqualification Claim, face a risk of a Compensation Order, do not want to be disqualified immediately or cannot risk being placed on the Director Disqualification Register, then the only alternative may be to defend the Disqualification Proceedings.

Defending the Director Disqualification Claim

Where a Director seeks to defend a Director Disqualification Claim steps must be taken carefully, to maximise the effectiveness of your expenditure on legal costs and to best position yourself for the final finding of your unfitness, as a Director, at trial.

Below we set out the key aspects you should consider when embarking on your defence of a Disqualification Claim:

  1. Pre-action : ability to make representations
  2. Legal proceedings : Your Defence
  3. Legal Proceedings: Length and Cost
  4. Litigation Funding
  5. Disqualification Undertakings provided during proceedings [LINK TO 6E]

The above steps cover the procedure and funding needs and tactical considerations on your position as a Director (perhaps in respect of a new company).

Defending a Director Disqualification Claim through to trial is not inexpensive and is not always necessary, and thus it is critical to get the appropriate legal advice before you make any decision as to defending such proceedings (as against the risks you face).

At Francis Wilks & Jones we have considerable experience of Director Disqualification matters and defending them through to trial and it is almost always the case that contesting proceedings through to trial is almost always the only way to expose a weak Disqualification Claim.  

Please call any member of our Director Disqualification team for a consultation now on 020 7841 0390. Alternatively please email us with your enquiry and we will call you back at a time convenient for you.