Court Proceedings

If the Secretary of State has issued proceedings against you seeking an order that you be Disqualified and/or you are either facing the prospect of the Court making a Disqualification Order or you are considering offering a Disqualification Undertaking then you must also be considering your future business plans – often either employment, retirement or setting up/continuing your business as an unincorporated trading entity.

Considering your future needs is very important when facing the prospect of Director Disqualification, as for some individuals this can impose grave restrictions on you/your business.

For a lot of Directors, they may choose an employed position and, provided this employed position does not involve the management of a company or LLP the risks of disqualification are minimal.

However, for Directors who may have since set up a new company, or indeed those who may later wish to set-up a new company or become involved in the management of another company, the only option available is to seek a Court Order that you be granted leave to act as a Director of such a company notwithstanding the fact that you are legally disqualified from taking such a role.

Initial Strategy

If you are a Director facing investigations or a potential disqualification claim, or at the least have received notice of such intended proceedings by way of a Section 16 Letter then it is important you consider your options at an early stage, particularly the benefit/detriment of whether you would prefer to defend a Disqualification Claim as opposed to taking the more commercial decision to offer a Disqualification Undertaking.

We discuss the benefit/detriment of these options here.

The most important part of your decision-making process will focus on your exposure to legal costs, the timing of your business/personal needs, any key events which may affect these factors, the type of business you are involved in and the types of client you have.

Court Procedure

A Solicitor will be required to apply for Leave to Act as a Director, whether this is before your disqualification commences or after.

A detailed application and supporting evidence will have to be drafted dealing with key issues in respect of the previous company and your current (or previous) Disqualification, and the new company – its finances, management structure, business, risks it faces and dealing with the problems or misconduct that arose before.

Once this is dealt with, the proceedings are issued and a hearing date fixed, preferably for a lengthy period of time necessary to deal with all of the substantive matters involved (including the need for the Secretary of State to set out its case before the Court and draw the Court’s attention to public interest issues).

Some of the public interest concerns raised by the Secretary of State may be resolved via exchanges between the Director/Secretary of State’s solicitors before the hearing.  Otherwise, such matters must be resolved at the hearing.

Court’s Discretion

The Court has a discretion as to whether leave should be granted for a Director to act as a Director of the named company(s).

The Court must not only consider the public interest purpose of the Disqualification Proceedings, but also the public interest risk to the current company and its stakeholders in not granting permission for the Director to act as a Director of this new company notwithstanding the disqualification.

The Court will consider the Period of Disqualification and the current company’s financial and other circumstances and the representations from the Secretary of State when reaching its decision.

Order granting Leave

It is important that the Order granting leave is correctly drafted with the appropriate conditions attached to regulate the affairs of the new company, as a term of providing a Director with permission to commence or continue acting in this capacity.

If such conditions are not attached, or are attached but inn insufficient detail, the Secretary of State will raise concerns and the Court will not grant leave to act.

As part of the terms of such an Order, as it is granted on a discretional basis following a Director’s disqualification, the Director will have to pay the Secretary of State’s reasonable legal costs.

Importance of Expert Legal Advice

Without a solicitor who holds the requisite experience of such matters, this application is likely to fail as a result of the failure to adhere to numerous strategical and procedural requirements (almost all of which are not set down in any manual or statute).

At Francis Wilks & Jones we have considerable experience of making applications for leave to act as a Director and pursuant to Section 17 Company Director Disqualification Act 1986.  Managed correctly a Director will obtain leave to act notwithstanding his/her disqualification.

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.