Disqualification summary

Directors can be disqualified from office for a range of reasons. Use our summary to make sure that your board is aware of what can give rise to disqualification and what to do if a person is disqualified.

When can a director be disqualified?

Disqualification can be imposed in a wide range of circumstances, ranging from breaches of filing requirements to fraudulent trading. Disqualification proceedings usually stem from other investigations or proceedings, such as a company’s affairs being investigated when it goes into liquidation or legal infringements being investigated by the police or another authority such as the Competition and Markets Authority.

Impact

If a person is disqualified, they are not just prevented from holding the office of director. They cannot be involved in the promotion, formation or management of a company at all. The court may give permission to act in very defined circumstances, for example enabling a disqualified director to continue for a period of time to hand over to their successor, or allowing them to perform particular functions under supervision. The order will specify how long the disqualification lasts.

If one of your directors is disqualified, make sure that they are not allowed to participate in company’s management. File Form TM01 at Companies House within 14 days.

Disqualification undertakings

In order to avoid the publicity, stress and expense of court proceedings, it is common for directors to give disqualification undertakings rather than have an order made against them. These have the same effect as a disqualification order. They will specify a time period during which the person is disqualified and will set out the scope of any permission to act that has been granted.

Not just directors

Non-directors can also be disqualified This is to tackle misconduct by people like shadow directors and others who influence the directors from behind the scenes.

Beware!

When appointing a new director, or accepting the involvement of someone new behind the scenes, it is always worth checking Companies House’s register of disqualified directors to make sure that you are not allowing a disqualified person to be involved in your company. You could actually be held personally liable for the company’s debts if you allow a disqualified person to be involved in your company’s management.