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On What Grounds Can You Be Disqualified as a Company Director?

In the UK, directors have a responsibility to manage their companies properly and watch out for any signs of financial trouble. If they fail in this duty, they may be held personally liable for any debts or losses caused by their negligence. In addition to this criminal liability, a director can be disqualified from working as one.

Disqualification as director

When a director is disqualified, they are banned from running companies or sitting on the board of any business. Disqualification is usually imposed by way of an order made by the court after one of its hearings.

The director’s main responsibility is to protect the interests of their company and ensure that it operates within the law. They must also keep full and accurate accounting records of any transactions involving the business’ funds – this includes all salaries paid out and bills received, as well as any other expenses or income.

Directors who neglect their duties may be breaking one or more of three criminal offences: misconduct; negligence; or insolvent trading (where a director allows a company to trade while he knows it cannot meet its liabilities). If found guilty, they can face fines and even imprisonment.

Reasons for director disqualification include:

  • The director has failed to submit accounts to Companies House by the legal due date
  • The director has failed to keep proper company accounting records
  • The director has submitted accounts that are misleading, false or deceptive
  • The director has removed money from the company for personal use without authorisation by the board of directors
  • The director has allowed a company to continue trading when it can’t pay its debts.

Summary

In the UK, company directors have a responsibility to manage their companies properly and must not neglect it. If they do fail in this duty, director disqualification from acting as director of any business might be imposed by an order made by the High Court. The director can be imprisoned for contempt of court if he fails to comply with such order. Disqualifications usually last for up-to 15 years depending on the seriousness of consequences that arose from director’s misconduct when discharging their director duties.

If you are a director of a company and believe your company may be insolvent, it’s imperative you take early advice. Please don’t hesitate to contact Bridgewood for expert insolvency advice.

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Thomas Grummitt and Andrew Smith are licensed to act as Insolvency Practitioners in the UK by the Insolvency Practitioners Association. In carrying out all work related to an insolvency appointment, insolvency practitioners are bound by the insolvency code of ethics and are subject to the regulations and guidance of their authorising body. Details of the code of ethics, statements of insolvency practice and other regulations and guidance issued by the Insolvency Practitioners Association can be found here: