Until 2000, Directors faced with the threat of being disqualified could not voluntarily agree to such disqualification. Directors had to instead await the issue of a Director Disqualification Claim litigation proceedings before deciding whether to file evidence in defence or proposing a resolution via the Court, which was also known as Carecraft proceedings.
This meant that for almost every disqualification sought by the Secretary of State, solicitors would have to be employed (on both sides) with the resultant costs consequences and absorption of a large amount of Court time.
However, under the Insolvency Act 2000, a remedy to this problem was introduced by introduction of Section 1A of the Company Directors Disqualification Act 1986, which provided that in certain specified circumstances the Secretary of State may accept an undertaking from a Director, for a specified period that s/he :
“ will not be a director of a company, act as a 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 a court”
Once a Disqualification Undertaking is accepted by or on behalf of the Secretary of State, it will commence 21 days after acceptance.
Period of Disqualification
The period of disqualification, whether that be by way of Disqualification Undertaking or as a result of a Court Order secured as a result of an issued Disqualification Claim, will usually fall into one of the following brackets:
- Less serious: 2-5 years.
- Serious: 5-10 years
- Very Serious
Please see our webpage here which addresses the consideration before a period of disqualification is sought to be imposed. Where a Disqualification Undertaking is offered to a Director, the period offered will mirror these considerations.
Should I accept a Disqualification Undertaking?
Before accepting a Disqualification Undertaking it is vital to consider what benefits it will provide and what risks you must accept by entering into it. These are set out at the following links below:
- Benefit and purpose of a Disqualification Undertaking
- When can you agree to be Disqualified?
- Carecraft proceedings
- Schedule of Misconduct
- Risk and Consequence of Disqualification Undertaking
Whilst a Disqualification Undertaking may appear an easy resolution to such matters, it is not cost or risk free and one of the most important considerations is the potential consequences including the risk of a Compensation Order.
At Francis Wilks & Jones we have considerable experience of Director Disqualification proceedings and advising Directors on the benefits and risks of entering into a Disqualification Undertaking either generally or as a component of a strategy to remain as a Director of your current company.
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 [EMAIL ADDRESS] and we will call you back at a time convenient for you.