Close Menu
UK Liquidators

On what grounds can a company director be disqualified?

Low-Cost Liquidation
100% Confidential
Stop HMRC & Creditor Pressure
Partner-led Service

How can director disqualification happen?

Company directors can be disqualified on the grounds of unfit conduct, which incorporates a wide range of behaviours and actions. The consequences of disqualification can be severe, including hefty fines and even criminal proceedings if fraudulent activity is found.

Directors can be disqualified for between two and 15 years. During this time they’re legally banned from becoming a director or being involved in the formation, marketing, or running of a limited company.

How does director disqualification work?

The Company Directors Disqualification Act (CDDA), 1986, lays out the circumstances in which a director can be disqualified, and the director’s obligations under a disqualification order.

When a company becomes insolvent, the appointed administrator or liquidator investigates the reasons why the company declined. They report back to the Secretary of State on the conduct of all directors who have been in office for the previous three years. If instances of misconduct are found, the Insolvency Service takes the steps they deem necessary, potentially leading to director disqualification.

Worried about your Bounce Back Loan?

If you are a limited company director worried about how you are going to repay your Bounce Back Loan, we are here to help. As licensed insolvency practitioners we can talk you through your options when it comes to repaying your outstanding Bounce Back Loan, as well as handling all negotiations with creditors on your behalf. Call our team today on 0800 063 9262 .

Director disqualification and the public interest

Disqualification is intended to protect the public from unscrupulous directors who deliberately try to benefit from the limited company structure, which separates the company’s finances from their own.

It’s easy for directors to unwittingly create losses for their creditors, however, by continuing to trade an insolvent company in the belief that they can improve the situation for stakeholders. That’s why it’s highly advisable to seek guidance from a licensed insolvency practitioner at the earliest stage of financial decline.

What constitutes unfit conduct?

The following forms of conduct could lead to disqualification for directors, but this list is far from exhaustive as ‘unfit conduct’ covers a broad spectrum of actions:

  • Allowing a company to trade when it’s insolvent
  • Misappropriating company funds
  • Failing to pay tax owed by the company
  • Not filing statutory accounts and returns at Companies House
  • Failing to keep proper business records
  • Failing to co-operate with the office-holder and/or Insolvency Service

A key element of disqualification is that it can be applied to other officers of the company who aren’t directors – for example, shadow directors.

Disqualification orders and disqualification undertakings

Director disqualification can take place in two different ways - via a court order and a disqualification undertaking.

Disqualification order

This is an order of the court that disqualifies a director for a stated period. Court proceedings are not criminal unless fraudulent activity is found – they’re civil proceedings that can also result in a fine for the director involved.

Disqualification undertaking

In some instances, a director may voluntarily make a disqualification undertaking, which avoids the publicity of court process, but ultimately has the same outcome – a ban on being a director or being involved in the formation, marketing, or running of a company for the specified time.

In both cases directors may be banned from taking other offices, or incur restrictions by organisations such as charities, pension trustees, police forces, and legal/accountancy practices, due to the disqualification.

Start your online liquidation today

If you have decided liquidation is the right option for your limited company, you can take the first step and begin the process online using our online portal. Starting the process is quick, simple, and can be done at a time that suits you. Your information will be submitted to your local UK Liquidators insolvency practitioner who will be with you every step of the way. Click here to start your company’s liquidation online.

What if a director contravenes a disqualification order or undertaking?

If a director goes against the terms of a disqualification order or undertaking, they could face criminal prosecution and a prison sentence. An extended period of disqualification is also likely to be applied. Contravening director disqualification is a serious offence, and it’s important for directors to comply with the order or undertaking for the full term.

If you would like more guidance or information on director disqualification, please get in touch with our expert team at UK Liquidators. We offer free, same-day consultations so you can quickly understand your obligations as a director.

Jonathan Munnery
Insolvency & Restructuring Expert

If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.

Is liquidation the right option for you?

Take our 60 second test and find out

Company health risk assessment
Types of liquidation available
Alternatives to liquidation
Understand your next steps
60 Second Liquidation Test
Pages related to How can director disqualification happen?
Shareholders Meeting
Can a 50-50 shareholder put a company into liquidation?
Director Back Work
Can I be a director again after my business folds?
Liquidator Investigating The Company
Can I be investigated if my company goes into liquidation?
Did you know?
Are you eligible to claim Director Redundancy?
As a Limited Company Director you may be entitled to claim Director Redundancy - Average UK claim is £9,000*.
Ready to Liquidate?
Express Liquidation Service
Ready to start liquidating today? Complete the form and a member of our team will be in touch.
Please note: By completing this form you are not liquidating your company
Contact the UK Liquidators Team

If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.

  • Free initial consultation
  • Strictly confidential
  • Fully licensed insolvency practitioners
  • Local office support
  • Named case handler throughout
Logo Tma
Logo Business Recovery
Logo Cse
Logo Iip

Looking for immediate support?

Complete the below to get in touch

 
 
 
 
 
100% Free & Confidential Advice

This site uses cookies to monitor site performance and provide a more responsive and personalised experience. You must agree to our use of certain cookies. For more information on how we use and manage cookies please read our PRIVACY POLICY