5 Pages

Disqualification of directors

The court is given the power under the CDDA 1986 to make an order against a person that he or she shall not, without leave of the court, be a director of a company or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company. There are a number of grounds on which an order can be made, eg where a person is convicted of an indictable offence in connection with the promotion, formation, management or liquidation of a company (s 2), or where a person is in persistent breach of the companies legislation in respect of filing of accounts (s 3). The most important ground is contained in s 6 which provides that a court must make a disqualification order against a person where it is satisfied that that person has been a director of a company which has become insolvent and that his conduct as a director makes him unfit to be concerned in the management of a company. The minimum order under this section is two years and the maximum is 15 years. Schedule 1 to the CDDA lists the matters to which the court should have regard when determining whether a person’s conduct makes him unfit to be concerned in the management of a company and these include any breach of duty (fiduciary or otherwise) by the director and, where the company has become insolvent, the extent of the director’s responsibility for the causes of the company becoming insolvent (see Re Sevenoaks Stationers (Retail) Ltd (1991); Re Polly Peck International plc (No 2) (1994); Re Westmid Packing Services Ltd (1998); Re Barings plc (No 5) (2000); Secretary of State for Trade and Industry v Creegan (2002)).