Disqualified Directors and their legal responsibilities
A company director can be banned (‘disqualified’) from being a company director if they don’t meet their legal responsibilities.
Anyone can report a company director’s conduct as being ‘unfit’. ‘Unfit conduct’ includes:
- allowing a company to continue trading when it can’t pay its debts
- not keeping proper company accounting records
- not sending accounts and returns to Companies House
- not paying tax owed by the company
- using company money or assets for personal benefit
- Individuals are not usually allowed to be a company director if they’re under restriction from bankruptcy or a Debt Relief Order.
How disqualification works
The Insolvency Service may investigate a company (or an individual personally as a director of a company) if it’s involved in insolvency proceedings or if there’s been a complaint. If they think they haven’t followed their legal responsibilities as a director, they’ll inform them in writing of the following:
- what they think the director has done that makes them unfit
- that they intend to start the disqualification process
- how the director can respond
The director can either:
- wait for The Insolvency Service to take them to court to disqualify them – they can defend the case in court if they disagree with The Insolvency Service
- give The Insolvency Service a ‘disqualification undertaking’ – this means they will voluntarily disqualify themselves and ends court action against them
Apart from The Insolvency Service, other bodies can apply to have an individual disqualified under certain circumstances, these include:
- Companies House
- the Competition and Markets Authority (CMA)
- the courts
- a company insolvency practitioner
If a director is disqualified
They can be disqualified for up to 15 years. This means a disqualified director can’t:
- be a director of any company registered in the UK or an overseas company that has connections with the UK
- be involved in forming, marketing or running a company
- They could be fined or sent to prison for up to 2 years if they break the terms of the disqualification.
The details on a Disqualified Director become a matter of public record so the details will be published online in:
- the Companies House database of disqualified directors – the details will automatically be removed from the database when your disqualification ends
- The Insolvency Service’s register of directors they got disqualified in the last 3 months, including details of why they were banned
They must ask a court for permission if they want to be a company director while they’re disqualified.
There are other restrictions if they’re disqualified. For example, they might not be able to:
- sit on the board of a charity, school or police authority
- be a pension trustee
- be a registered social landlord
- sit on a health board or social care body
- be a solicitor, barrister or accountant
Please note: Individuals can be prosecuted and become personally liable for the company’s debts if they carry out company business on the instructions of a disqualified director.