Director disqualification is a legal procedure with which a director can be asked to step down from his role and relinquish his position and powers. There can be more than a few reasons why a director can become susceptible to disqualification. They might not be competent, may have been involved in wrongdoings, or the company might have become insolvent.
Whatever the reason is, a director being disqualified is a big moment for any company. But today, we will not go into what or how a director can be open to disqualification. Rather, we will focus on what happens after a director is disqualified from their position. Without much delay, let us get to the heart of the matter.
Direct effects of disqualification
Director disqualification is not a private matter that is done and dealt with within four walls. In fact, such matters are very much public and may cause the person in question great humiliation and embarrassment. It can also cause great drawbacks in an individual’s career. Therefore, here are the effects that may occur on an individual’s life after disqualification:
- Details of the disqualification will be published in the Companies House database (for disqualified directors) and will only be removed after the disqualification duration ends.
- The individual will not be able to hold the position of a director for any company for the duration, which can last from 2 to 15 years.
- The individual may still be a partner (apart from a limited liability partnership) or a sole trader.
- If the individual is associated with an authorized professional body (accountant, barrister, solicitor, and so on), the body may try to prevent the individual from practicing their profession at all during the disqualification period.
- The individual may be unable to hold any position of trust.
- The individual may be held liable for fines and losses from the acts of negligence and crime. This may lead to bankruptcy.
- If not recorded well, the individual may be held responsible for the decisions taken by the other board members, especially if there is a disagreement.
These are more or less the things that can happen following a disqualification. However, depending on the situation, there might be neither side effects.
How long can the duration of disqualification be?
The duration of the disqualification depends on various things and considerations. For instance, the duration can be two years or may go up to 15 years as well. Here is a breakdown of the duration based on their relevant factors:
- For recklessness and negligence as a director: 2 to 5 years
- For more serious misconduct that may be inimical to the general public interest: 6 to 10 years
- For criminal offenses, fraudulent, and severe breaches: 11 to 15 years
What steps can an individual take against disqualification?
If there has been an appeal for disqualification against an individual, it is not like there is nothing that the said individual cannot do. There are certain things that the individual can opt to do after director disqualification has been appealed. Here is what they can do:
Attending court and defending their case
If the individual wants to defend their case, they are free to do so. They can approach the court and stand for their case. In doing so, the court will thoroughly see if the conduct and standard of the individual have fallen below what is required of a person fit to be a director. While at it, the court will also take a look at all the other mitigating factors.
If the Court still issues a disqualification certificate, the individual in question will also have to pay for various inconveniences and expenses (especially that of the Secretary of State and other involved parties) and other fines.
Opting for a disqualification undertaking
The other option to opt for is offering a disqualification undertaking. In this case, the individual in question offers to voluntarily disqualify themselves before the court issues a certificate. This allows the individual to move on with their career. However, once the Secretary of the State accepts the undertaking, it is equivalent to a legal court order. Therefore, it is recommended that one takes strong legal advice before taking this step.
Interesting Related Article: “Reasons Why Your Business Needs a Facility Management App“