News story

Strengthening the company director disqualification process

New measures come into force on 1 October 2015 to provide a greater deterrent for company directors against acting improperly.

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A compensation process is also being introduced to provide better financial redress for the loss creditors have suffered as the result of the conduct of disqualified directors.

The company director disqualification process is strengthened so that from 1 October 2015 the law states that the Secretary of State can seek to have a director of a limited company disqualified if they:

  • have been convicted of a company related offence abroad
  • influenced or instructed a director to behave in a way that has resulted in the disqualification of that director
  • breach laws or regulations
  • have a track record of being involved in failing companies

The nature and extent of any harm and loss caused must also now be considered when deciding if disqualification is appropriate.

The Secretary of State can, for unfit conduct occurring after 1 October 2015, use information from other regulators in disqualification proceedings.

The maximum period of time elapsing between a company being declared insolvent and the Secretary of State seeking disqualification proceedings increases from 2 to 3 years.

A disqualified director can in future be required by the Court to pay compensation to creditors who have lost out financially for unfit conduct that occurs after 1 October 2015.

These changes follow the passage of the Small Business, Enterprise and Employment Act 2015 which received Royal Assent in March.

Published 18 September 2015