This help guide explains when and how you can get disqualified from being the director of a limited company and the procedure for director disqualification.
Note: It also includes details about new legislation that targets unfit directors of dissolved companies and leaves staff with a debt.
UNFIT CONDUCT: Failing to meet the legal responsibilities of a company director means you can get banned.
Being banned as a director results from 'unfit conduct' which can include:
Note: Anyone can report a disqualified director or their unfit conduct. As a rule, a Debt Relief Order or bankruptcy restrictions mean you cannot be a company director.
There are several reasons why The Insolvency Service might investigate a company. They may also investigate the company director 'personally'.
Either, or both, of these can happen if there is any involvement in insolvency proceedings. The same applies if someone made a complaint.
What happens if they believe a director failed to follow their legal responsibilities? In this case The Insolvency Service will inform them in writing:
In response, the company director who is getting disqualified can then choose between:
Note: Getting a letter about director disqualification from The Insolvency Service is a serious matter. It is best to get legal advice if it happens.
Other entities can also apply to have a company director disqualified. Under certain circumstances the other bodies include:
The worst cases of director disqualifications can be up to 15 years long. Once banned, directors cannot:
Note: Breaking the terms of a director disqualification can result in a fine or a sentence in jail for up to 2 years.
Details of the disqualification will get published online via:
What if you want to become the director of a company while disqualified? In this case you must ask a court for permission to do so. You may also need the help of a legal adviser.
There are several other disqualified directors restrictions that can apply after company director disqualification. As a rule, disqualified company directors cannot:
Note: Carrying out company business on the instructions of a person already disqualified is illegal. It can result in a prosecution and you can get held 'personally' responsible for company debts.
The introduction of new legislation extends more power to the Insolvency Service (headquartered in London). As a result, they can investigate directors of dissolved companies (e.g. corporate insolvency).
It closes a legal loophole and should act as a strong deterrent for any company directors planning any misuse of the dissolution process in the United Kingdom.
Thus, using dissolution as a fraudulent method to avoid making repayments came above the radar. It particularly addresses improper directors from misappropriating loans given to businesses by the government (e.g. support during the Coronavirus pandemic).
Empowering extended investigations means the Insolvency Service can act on behalf of the Business Secretary and disqualify a company director for a period of fifteen (15) years.
The new measures can stop the director of a dissolved company from setting up an 'identical' business, following a dissolution. Often, doing so means customers and other creditors do not get paid (e.g. staff, taxpayers, and HM Revenue and Customs).
Furthermore, the new Bill enables the Insolvency Service to challenge any directors who 'inappropriately' wind-up a limited company to benefit from Bounce Back Loans.
Procedure for Director Disqualification in the United Kingdom