Company Directors Disqualification Act 1986

Section 6 provides that a Court shall disqualify a director from being a director of any company, for a period of 2-15 years if it makes a finding of "unfitness", if satisfied that:

a. he is or has been a director of a company which has at any time become insolvent and

b. that his conduct as a director of that company (taken alone or with his conduct as a director of any other company) makes him unfit to be concerned in the management of a company.

The Act imposes a criminal (up to 2 years imprisonment) and civil liability for the debts of the company if an order for disqualification is breached.

Wide definition of unfitness e.g. failure by a director to make himself aware of the company's financial position by asking for financial information. Includes a marked degree of negligence or incompetence.

Includes anyone acting as a director whether appointed as such or not and includes a shadow director i.e. a person who lurks in the background issuing instructions!

What can be done?

The respondent can fight the application by demonstrating that either

a. He was not unfit.
b. He was not a director/shadow director.
c. The liquidator's allegations are wrong.

He can avoid the catastrophic effects of disqualification by an application under Section 17 for leave to act as a director of a specific company. He would have to satisfy the court that the new company is running satisfactorily. The Court might wish to put in place safeguards to protect creditors.

Each case depends on its own facts, usually involving a detailed examination by our own accountants of the trading history of the company i.e. was it insolvent at certain dates, was the director entitled to take the decisions he did.