The provisions for disqualification of directors are contained in the Company Directors Disqualification Act 1986.
Often owners (shareholders) are also the directors of a company. Use of company enables the business affairs to be kept separate from personal affairs as the company is in itself as separate legal entity thus the liability of the owners is limited to the capital invested in the shares of the company. The Company Directors Disqualification Act 1986 is introduced to stop incompetent or unscrupulous individuals from leading and managing companies for a period of time with the intention to abuse the law.
Directors may be disqualified under the following circumstances:
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On conviction for an offence connected with promotion, formation, management or liquidation of the company.
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The company continued to trade with intent to defraud creditors (suppliers) even in the process of winding up.
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If guilty of a fraud in relation to the company.
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For non-compliance with the Companies Act with persistent default that is at least three offences within five years.
Disqualification can be for up to 15 years and the court has the discretion whether or not to make the order. It must however, disqualify a director whose conduct in relation to the company, alone or together with his conduct as director of another company, make him in the court’s opinion, unfit to be concerned in the management of a company.
The disqualified director is jointly and severally liable for the debts incurred by the company, and the liability extends to anyone acting on his/her instructions.
The Register of Disqualification Orders, maintained by the Secretary of State is open to public inspection.
The Companies House disqualified directors list gives details of disqualification orders for directors in England, Wales and Scotland. The record is updated weekly.
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