© 2024 by Michael Firth KC, Gray's Inn Tax Chambers
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T5a. Directors disqualification
Purpose of rules
"[167] (a) Guidance should be obtained from looking at the purpose of the provision in question (Holland at [39]). The primary purpose of the disqualification legislation is the protection of the public. Those who assume the status and functions of a company director should be held to certain minimum standards in the public interest. The legislation has both a deterrent element and serves as an encouragement to improve standards of behaviour (see [148] above, referring to the judgment of Lord Woolf MR in Re Blackspur Group). I do not think that the purpose of the disqualification legislation is sufficiently different from the purpose of the legislation considered in Holland materially to affect the force of the observations in that case in a disqualification context." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Court's duty to disqualify unfit director of insolvent/dissolved company
"(1)In the circumstances specified below in this Act a court may, and under sections 6 and 9A shall, make against a person a disqualification order, that is to say an order that for a period specified in the order—
(a)he shall not be a director of a company, act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court, and
(b)he shall not act as an insolvency practitioner." (Company Directors Disqualification Act 1986, s.1(1))
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"(1)The court shall make a disqualification order against a person in any case where, on an application under this section —
(a)the court is satisfied—
(i) that the person is or has been a director of a company which has at any time become insolvent (whether while the person was a director or subsequently), or
(ii) that the person has been a director of a company which has at any time been dissolved without becoming insolvent (whether while the person was a director or subsequently), and
(b) the court is satisfied that the person’s conduct as a director of that company (either taken alone or taken together with the person’s conduct as a director of one or more other companies or overseas companies) makes the person unfit to be concerned in the management of a company." (Company Directors Disqualification Act 1986, s.6(1))
"(a) Section 6 CDDA imposes a duty on the court to make a disqualification order where the conditions are satisfied, in contrast to the discretion conferred by s 8 (disqualification after investigation) which applies in circumstances where a company may not have become insolvent." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Conduct includes conduct connected with or arising out of the insolvency
"(1A)In this section references to a person's conduct as a director of any company or overseas company include, where that company or overseas company has become insolvent, references to that person's conduct in relation to any matter connected with or arising out of the insolvency." (Company Directors Disqualification Act 1986, s.6(1A))
Meaning of insolvent: UK company
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"(2)For the purposes of this section, a company becomes insolvent if—
(a)the company goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up,
(b)the company enters administration,
(c)an administrative receiver of the company is appointed;" (Company Directors Disqualification Act 1986, s.6(2))
"Company” means—
(a)a company registered under the Companies Act 2006 in Great Britain, or
(b)a company that may be wound up under Part 5 of the Insolvency Act 1986 (unregistered companies)." (Company Directors Disqualification Act 1986, s.22(2))
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Meaning of insolvent: overseas company
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"(2A)For the purposes of this section, an overseas company becomes insolvent if the company enters into insolvency proceedings of any description (including interim proceedings) in any jurisdiction." (Company Directors Disqualification Act 1986, s.6(2A))
"An “overseas company” is a company incorporated or formed outside Great Britain." (Company Directors Disqualification Act 1986, s.22(2A))
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Court
"(3)In this section and section 7(2), “the court” means—
(a)where the company in question is being or has been wound up by the court, that court,
(b)where the company in question is being or has been wound up voluntarily, any court which has or (as the case may be) had jurisdiction to wind it up,
(c)where neither paragraph (a) nor (b) applies but an administrator or administrative receiver has at any time been appointed in respect of the company in question, any court which has jurisdiction to wind it up,
(d)where the company in question has been dissolved without becoming insolvent, a court which at the time it was dissolved had jurisdiction to wind it up." (Company Directors Disqualification Act 1986, s.6(3))
"(3A)Sections 117 and 120 of theInsolvency Act 1986 (jurisdiction) shall apply for the purposes of subsection (3) as if the references in the definitions of “registered office” to the presentation of the petition for winding up were references—
(a)in a case within paragraph (b) of that subsection, to the passing of the resolution for voluntary winding up,
(b)in a case within paragraph (c) of that subsection, to the appointment of the administrator or (as the case may be) administrative receiver." (Company Directors Disqualification Act 1986, s.6(3A))
Wrong court does not invalidate proceedings
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"(3B)Nothing in subsection (3) invalidates any proceedings by reason of their being taken in the wrong court; and proceedings—
(a)for or in connection with a disqualification order under this section, or
(b)in connection with a disqualification undertaking accepted under section 7,
may be retained in the court in which the proceedings were commenced, although it may not be the court in which they ought to have been commenced." (Company Directors Disqualification Act 1986, s.6(3B))
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Time limit for application: usually 3 years from insolvency
"(1)If it appears to the Secretary of State that it is expedient in the public interest that a disqualification order under section 6 should be made against any person, an application for the making of such an order against that person may be made—
(a) by the Secretary of State, or
(b) if the Secretary of State so directs in the case of a person who is or has been a director of a company which is being or has been wound up by the court in England and Wales, by the official receiver.
(2) Except with the leave of the court, an application for the making under that section of a disqualification order against any person shall not be made after the end of the period of 3 years beginning with —
(a) in a case where the person is or has been a director of a company which has become insolvent, the day on which the company became insolvent, or
(b) in a case where the person has been a director of a company which has been dissolved without becoming insolvent, the day on which the company was dissolved." (Company Directors Disqualification Act 1986, s.7(1), (2))
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Discretion where company not insolvent
"(1)If it appears to the Secretary of State that it is expedient in the public interest that a disqualification order should be made against a person who is, or has been, a director or shadow director of a company, he may apply to the court for such an order.
(2)The court may make a disqualification order against a person where, on an application under this section, it is satisfied that his conduct in relation to the company (either taken alone or taken together with his conduct as a director or shadow director of one or more other companies or overseas companies) makes him unfit to be concerned in the management of a company.
[...]
(2B)Subsection (1A) of section 6 applies for the purposes of this section as it applies for the purposes of that section.
(3)In this section “the court” means the High Court or, in Scotland, the Court of Session.
(4)The maximum period of disqualification under this section is 15 years." (Company Directors Disqualification Act 1986, s.8)
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Power to accept disqualification undertaking
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"(2A)If it appears to the Secretary of State that the conditions mentioned in section 6(1) are satisfied as respects any person who has offered to give him a disqualification undertaking, he may accept the undertaking if it appears to him that it is expedient in the public interest that he should do so (instead of applying, or proceeding with an application, for a disqualification order)." (Company Directors Disqualification Act 1986, s.6(2A))​
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"(2A)Where it appears to the Secretary of State that, in the case of a person who has offered to give him a disqualification undertaking—
(a)the conduct of the person in relation to a company of which the person is or has been a director or shadow director (either taken alone or taken together with his conduct as a director or shadow director of one or more other companies or overseas companies) makes him unfit to be concerned in the management of a company, and
(b)it is expedient in the public interest that he should accept the undertaking (instead of applying, or proceeding with an application, for a disqualification order),
he may accept the undertaking." (Company Directors Disqualification Act 1986, s.8(2A))​
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Director includes de facto directors
“Director” includes any person occupying the position of director, by whatever name called." (Company Directors Disqualification Act 1986, s.22(4))
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"[167]...(b) There is no single test, but an important starting point is the company's corporate governance structure. The court is seeking to identify functions that were the sole responsibility of a director or board of directors, that is, the highest level of management of the company. Those who assume and exercise powers and functions that can only properly be exercised or discharged at that highest level of management will, consistent with the purpose of the disqualification legislation, be within its scope as de facto directors. Those who are subordinate and accountable to that highest level of management will not be.
(c) The test has been described as whether the individual was participating, or had the ability to participate, in decision-making as part of the corporate governing structure (which I take to mean the highest level of management decision-making). Another way of putting it is to ask whether the individual was on an "equal footing" with others in directing the affairs of the company.
(d) There is a distinction between being consulted about, advising on or otherwise being involved in, decision-making in some other capacity (even in circumstances where real influence is exerted) and actually participating in making a decision as a director.
(e) The question is one of fact and degree. It must be determined objectively, by reference to what the relevant individual actually did (including, for example, whether they were held out as a director and whether they took major decisions), and looking at the cumulative effect of the activities relied on in their overall factual context." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Director includes shadow director
"(3C)In this section and section 7, “director” includes a shadow director." (Company Directors Disqualification Act 1986, s.6(3C))
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"“Shadow director”, in relation to a company, means a person in accordance with whose directions or instructions the directors of the company are accustomed to act, but so that a person is not deemed a shadow director by reason only that the directors act—
(a)on advice given by that person in a professional capacity;
(b)in accordance with instructions, a direction, guidance or advice given by that person in the exercise of a function conferred by or under an enactment;
(c)in accordance with guidance or advice given by that person in that person's capacity as a Minister of the Crown (within the meaning of the Ministers of the Crown Act 1975)." (Company Directors Disqualification Act 1986, s.22(5))
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Burden of proof on Secretary of State
"[25] The burden of proof rests on the Secretary of State, to the ordinary civil standard but its application reflecting the nature of the allegations: "the seriousness of the allegation is reflected in the need for evidence of appropriate cogency to discharge the burden of proof" Etherton J, Secretary of State for Trade and Industry v Swan [2005] EWHC 603 (Ch) at [76]. Once the facts are established to that standard, "the court must be satisfied that the conduct alleged is sufficiently serious to warrant disqualification": ibid at [77]. The purpose of the legislation, directed both at the individuals concerned and directors as a whole, is both to protect the public and to encourage higher standards in corporate management." (Re X E Solutions Ltd [2021] EWHC 3261 (Ch), ICC Judge Prentis)
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Duty to take into account certain matters
"(1)This section applies where a court must determine—
(a)whether a person's conduct as a director of one or more companies or overseas companies makes the person unfit to be concerned in the management of a company;
(b)whether to exercise any discretion it has to make a disqualification order under any of sections 2 to 4, 5A, 8 or 10;
(c)where the court has decided to make a disqualification order under any of those sections or is required to make an order under section 6, what the period of disqualification should be.
(2)But this section does not apply where the court in question is one mentioned in section 2(2)(b) or (c).
(3)This section also applies where the Secretary of State must determine—
(a)whether a person's conduct as a director of one or more companies or overseas companies makes the person unfit to be concerned in the management of a company;
(b)whether to exercise any discretion the Secretary of State has to accept a disqualification undertaking under section 5A, 7 or 8.
(4)In making any such determination in relation to a person, the court or the Secretary of State must—
(a)in every case, have regard in particular to the matters set out in paragraphs 1 to 4 of Schedule 1;
(b)in a case where the person concerned is or has been a director of a company or overseas company, also have regard in particular to the matters set out in paragraphs 5 to 7 of that Schedule.
(5)In this section “director” includes a shadow director.
(6)Subsection (1A) of section 6 applies for the purposes of this section as it applies for the purposes of that section." (Company Directors Disqualification Act 1986, s.12C)
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Not an exhaustive list
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"[144] ...(e) However, the list in Schedule 1 is not exhaustive. In relation to paragraph 6 of Schedule 1, the relevant enquiry is to what extent were the respondent's failings responsible for the causes of the insolvency, rather than applying a test based on legal concepts of causation." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Schedule of matters to be taken into account
"Matters to be taken into account in all cases
1. The extent to which the person was responsible for the causes of any material contravention by a company or overseas company of any applicable legislative or other requirement.
2. Where applicable, the extent to which the person was responsible for the causes of a company or overseas company becoming insolvent.
3. The frequency of conduct of the person which falls within paragraph 1 or 2.
4. The nature and extent of any loss or harm caused, or any potential loss or harm which could have been caused, by the person's conduct in relation to a company or overseas company.
Additional matters to be taken into account where person is or has been a director
5. Any misfeasance or breach of any fiduciary duty by the director in relation to a company or overseas company.
6. Any material breach of any legislative or other obligation of the director which applies as a result of being a director of a company or overseas company.
7. The frequency of conduct of the director which falls within paragraph 5 or 6.
Interpretation
8. Subsections (1A) to (2A) of section 6 apply for the purposes of this Schedule as they apply for the purposes of that section.
9. In this Schedule “director” includes a shadow director." (Company Directors Disqualification Act 1986, Schedule 1)
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Not required to be unfit to manage any company
"[144] ... (b) Although on the face of it the expression "unfit to be concerned in the management of a company" would appear to mean unfit to be concerned in the management of any company without qualification, the court's ability to grant a respondent leave to be concerned in the management of a company under s 17 CDDA means that s 6 cannot have the wholly unqualified meaning that it appears to have.
(j) It is no defence to a charge of unfitness based on incompetence for the respondent to contend that, even if the director was grossly incompetent in discharging the management role in question, he or she has not been shown to be unfit to be concerned in the management of any company, that is a "lowest common denominator" approach. The issue is not whether the respondent could have performed in some other management role competently: the court is concerned only with the conduct in respect of which complaint is made, set in the context of the actual management role that the respondent had in the company." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Meaning of unfitness: dishonest or incompetent
"[144] ... (d) Jonathan Parker J described the test of being "unfit" as follows: "'Unfitness' may be shown by conduct which is dishonest (including conduct showing a want of probity or integrity) or by conduct which is merely incompetent. In every case the function of the court in addressing the question of unfitness is to 'decide whether [the conduct of which complaint is made by the Secretary of State], viewed cumulatively and taking into account any extenuating circumstances, has fallen below the standards of probity and competence appropriate for persons fit to be directors of companies' (see Secretary of State for Trade and Industry v Gray [1995] 1 BCLC 276 at 284, sub nom Re Grayan Building Services Ltd (in liq) [1995] Ch 241 at 253 per Hoffmann LJ). This has been described as 'a jury question' (see Re Sevenoaks Stationers (Retail) Ltd [1991] BCLC 325 at 330, [1991] Ch 164 at 176 per Dillon LJ)." (p.483a-c)." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Breach of duty neither necessary nor sufficient
"[144] ... (k) It is not a prerequisite of a finding of unfitness that there has been some misfeasance or breach of duty, and nor does misfeasance or breach of duty necessarily make an individual unfit. In particular, the fact that errors could be characterised as errors of judgment rather than negligent mistakes is not necessarily an answer to a charge of unfitness based on incompetence, because it might be demonstrated that the individual has shown him or herself "so completely lacking in judgment as to justify a finding of unfitness" (p.486f)." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Incompetence can include allowing something to happen
"[151] In Re Continental Assurance Co of London plc, Secretary of State for Trade and Industry v Burrows [1997] BCLC 48 Chadwick J made some comments about the role of a non-executive director, in that case an investment banker who had joined the board of a client. He made the point at p.58a that those dealing with the client company were entitled to expect that external directors appointed on the basis of their apparent expertise would exercise the competence required by companies legislation (then the Companies Act 1985), extending in the case of a corporate financier at least to reading and understanding statutory accounts. He also commented on the use of the phrase "cause or allow" in the allegation against the director (a phrase also used in this case), and said at p.58e that a director who failed to appreciate the obvious "allows" the consequences of what he has overlooked just as much as if he appreciated the position and did nothing about it, adding that unfitness includes incompetence in allowing something to happen that the legislation is designed to prevent (in that case a breach of the prohibition on financial assistance being provided for the acquisition of shares in the company)." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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High degree of incompetence required if that is sole complaint
"[144] ... (g) Where a case is based solely on allegations of incompetence, the burden is on the Secretary of State to satisfy the court that the conduct complained of demonstrates "incompetence of a high degree". The burden is a heavy one, as explained by the serious nature of a disqualification order." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Assess conduct in context
"[144]...(h) The requirement to assess conduct in context (or "in its setting") means that:
"…the court will assess the competence or otherwise of the respondent in the context of and by reference to the role in the management of the company which was in fact assigned to him or which he in fact assumed, and by reference to his duties and responsibilities in that role. Thus the existence and extent of any particular duty will depend upon how the particular business is organised and upon what part in the management of that business the respondent could reasonably be expected to play (see Bishopsgate Investment Management Ltd (in liq) v Maxwell (No 2) [1993] BCLC 1282 at 1285 per Hoffmann LJ). For example, where the respondent was an executive director the court will assess his conduct by reference to his duties and responsibilities in that capacity." (p.484c-d)" (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Standard of competence does not vary, but circumstances might
"[144]...(i) It follows that, while the requisite standard of competence does not vary according to the nature of the company's business or the respondent's role in management, and may therefore be said to be a "universal" standard, the standard must be applied to the facts of each particular case." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Assess by reference to role and responsibilities (e.g. non-executive)
"[152] However, as Jonathan Parker J recognised, context is critical, and the competence or otherwise of individuals will be determined by reference to the role they actually played, and the responsibilities they assumed. The fact that directors had non-executive roles is a relevant part of the context. As Hoffmann LJ said in Bishopsgate Investment Management v Maxwell [1993] BCC 120 at 139 in the context of the duty to participate in management, the extent of the duty "must depend upon how the particular company's business is organised and the part which the director could reasonably have been expected to play"." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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"[26] In common with the CA06, in treating directors' duties the CDDA draws no explicit distinction between the duties owed by executive and non-executive directors. But if the duties are the same, their application need not be. As indicated by the wording of s.174 CA06 the objective and subjective requirements are circumscribed by the actual role of the director. It follows that, as with the law concerning directors generally, the title the director carries is not necessarily conclusive as to function. To quote from Hoffmann LJ in Bishopsgate Investment Management v Maxwell [1993] BCC 120, 139, the extent of what is now the s.174 duty "must depend upon how the particular company's business is organised and the part which the director could reasonably have been expected to play". In many cases, not least because of the extensive risks they would run otherwise, the precise role of the particular non-executive director will be formalised in written terms of engagement, so director and company are clear about their duties and obligations. Absent that, the court must seek to discern the role from objective factors. Whatever the ambit of a non-executive's role, it cannot properly be discharged without at the least an ongoing enquiry into and knowledge of the company's business which pertains to it: in other words, a restrictive modification of one of the basic duties on a company director.
Where there has been a prescription or, put another way, delegation of roles between the directors then it is the long-standing law that a director is "entitled to rely upon the judgment, information and advice, of the chairman and general manager as to whose integrity, skill and competence he had no reason for suspicion": Lord Davey in Dovey v Cory [1901] AC 477, 492. Teased out, the director whose functions have been circumscribed remains under duties to supervise that delegation (see Kids Company at [859]: "Proper delegation does not involve abdication") and to assess its product (see Norris J in Sharp v Blank [2019] EWHC 3096 (Ch) at [628]: "reliance must in the particular circumstances be consistent with the discharge of the duty of reasonable skill and care")." (Re X E Solutions Ltd [2021] EWHC 3261 (Ch), ICC Judge Prentis)
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Be aware of the dangers of hindsight
"[150] In Re Living Images Ltd [1996] 1 BCLC 348 at pp.355-356, Laddie J discussed the fact that the standard of proof that applies is the civil standard, that is a balance of probabilities, and also said this about the risk of using hindsight:
"I should add that the court must also be alert to the dangers of hindsight. By the time an application comes before the court, the conduct of the directors has to be judged on the basis of statements given to the Official Receiver, no doubt frequently under stress, and a comparatively small collection of documents selected to support the Official Receiver's and the respondents' respective positions. On the basis of this the court has to pass judgment on the way in which the directors conducted the affairs of the company over a period of days, weeks or, as in this case, months. Those statements and documents are analysed in the clinical atmosphere of the courtroom. They are analysed, for example, with the benefit of knowing that the company went into liquidation. It is very easy therefore to look at the signals available to the directors at the time and to assume that they, or any other competent director, would have realised that the end was coming. The court must be careful not to fall into the trap of being too wise after the event."" (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Mitigating circumstances must relate to the conduct in question
"[144]...(f) Conduct must be evaluated in its context. It follows that the only extenuating circumstances which may be taken into account in addressing the question of unfitness, as opposed to the length of any disqualification order, are those which accompanied the conduct in question." (Re Keeping Kids Company [2021] EWHC 175, Falk J)
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Missing trader VAT fraud cases
"[21] ​In the same case he parsed the approach of HHJ Pelling QC, sitting as a High Court Judge, in Secretary of State for Business, Innovation and Skills v Corry (9 January 2012). At [7] HHJ Pelling QC stated that "the Secretary of State is entitled to demonstrate unfitness by establishing first that the company concerned is to be treated as knowingly involved in MTIC fraud by carrying out the steps that would normally be expected in a Kittel inquiry, and then that such knowledge as is to be attributed to the company was, in fact, knowledge of the relevant director for the purpose of bringing a disqualification application". That passage was expressly adopted by HHJ Hodge QC in Warry at [27]. HHJ Hodge QC continued: "the question of whether the relevant company is to be regarded as a participant in a transaction or transactions connected with the fraudulent evasion of VAT is only the first stage of the inquiry, with the court then having to move on to consider the extent of the respondent director's personal knowledge of, and involvement in, that fraud, and how that impacts upon his fitness to be concerned in the management of a company".
[22] The allegations against Mr Selby, Mr Sayed and Mr Awan track that two-stage process, and Ms Newstead Taylor and Mr Cole agreed that that was the appropriate approach for the court. It must be recognised, though, that where the relevant company has few directors a rigid demarcation between the two elements is not always helpful. Here, Mr Sayed and Mr Awan each expressed perfectly understandable difficulties with abstract questions about what the legal person which was the Company knew. It is for the Secretary of State to prove the knowing participation of the Company in the wrongful transactions but, while there are arguments over the individuals' precise roles and knowledge, the Company's knowledge could only come through one or more of these few defendants."
(Re X E Solutions Ltd [2021] EWHC 3261 (Ch), ICC Judge Prentis)
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Period of disqualification
"(4)Under this section the minimum period of disqualification is 2 years, and the maximum period is 15 years." (Company Directors Disqualification Act 1986, s.6(4))
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Knowing involvement in MTIC: over 10 years
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"The Re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164 banding of the 2-15 year period will apply. That has been subject to discussion in the particular context of MTIC fraud by HHJ Hodge QC, sitting as a High Court Judge, in Re Chapter 6 Limited; Secretary of State for Business, Innovation and Skills v Warry [2014] EWHC 1381 (Ch) at [48-52], seeking to provide legal certainty through consistency of approach "without seeking to provide a strait jacket for judges". He said this:
"[49] …the threat of MTIC fraud is so persistent, and so pervasive, and the loss to the revenue to the state is potentially so great, that I cannot conceive of any case in which disqualification for a period in the bottom bracket (of 2 to 5 years) would be appropriate.
"[50] In any case where the respondent director has been knowingly involved, and has played a significant role, in MTIC fraud, then a period of disqualification in the top bracket (of over 10 years) should be imposed. This is also likely to be appropriate in cases where the director has wilfully closed his eyes to MTIC fraud…" (Re X E Solutions Ltd [2021] EWHC 3261 (Ch), ICC Judge Prentis)
Ought to have known of MTIC fraud: 5 - 10 years
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"In any case where it is proved that the respondent director did not actually know but (without wilfully closing his eyes to the obvious) ought to have known of the MTIC fraud, the period of disqualification should be within the middle bracket (of more than 5 and up to 10 years). Absent extenuating circumstances, in my judgment, in such a case the disqualification period is likely to fall in the top half of that bracket, and thus between seven-and-a-half and 10 years." (Re X E Solutions Ltd [2021] EWHC 3261 (Ch), ICC Judge Prentis)
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Non-executive director of company involved in MTIC
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"[249] These are few, but sorry, exchanges between HMRC and the Company's only registered director, Mr Bamford. He has abrogated his duty in favour of the person who, he now knows, has behind his back conducted the pumping equipment transactions which HMRC are alleging are connected with MTIC fraud, and in respect of which they are assessing the Company for millions of pounds. He has continued to do so even though he is being told that Mr Selby is not providing the required information. The purpose of the requests is to obtain that information not through Mr Selby, but specifically through Mr Bamford as director; and who as director could compel Mr Selby or Ms Harvey or anyone else still connected with the Company to produce it. It is because he is the director that he is being appealed to. Yet at most he turns again and again to Mr Selby.
[250] This is also in my judgment a serious dereliction of duty. It would be so even on the large and most beneficent assumption that now he was sole registered director Mr Bamford's role remained as limited as it had been before, as Mr Selby was dealing with everything else. Mr Bamford has lost sight of the interests which even on his own account he was there to represent.
...
[254] What created that situation were the actions of Mr Selby, Mr Sayed and Mr Awan, exacerbated by Mr Bamford's abrogation of duty.
[255] I consider the period suggested by the Secretary of State of 4 years is appropriate." (Re X E Solutions Ltd [2021] EWHC 3261 (Ch), ICC Judge Prentis)
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Information powers
"(4) The Secretary of State or the official receiver may require any person —
(a) to furnish him with such information with respect to that person's or another person's conduct as a director of a company which has at any time become insolvent or been dissolved without becoming insolvent] (whether while the person was a director or subsequently), and
(b) to produce and permit inspection of such books, papers and other records as are considered by the Secretary of State or (as the case may be) the official receiver to be relevant to that person's or another person's conduct as such a director,
as the Secretary of State or the official receiver may reasonably require for the purpose of determining whether to exercise, or of exercising, any function of his under this section." (Company Directors Disqualification Act 1986, s.7(4))
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Disqualification of persons instructing unfit directors
"(1)The court may make a disqualification order against a person (“P”) if, on an application under section 8ZB, it is satisfied—
(a)either—
(i)that a disqualification order under section 6 has been made against a person who is or has been a director (but not a shadow director) of a company, or
(ii)that the Secretary of State has accepted a disqualification undertaking from such a person under section 7(2A), and
(b)that P exercised the requisite amount of influence over the person.
That person is referred to in this section as “the main transgressor”.
(2)For the purposes of this section, P exercised the requisite amount of influence over the main transgressor if any of the conduct—
(a)for which the main transgressor is subject to the order made under section 6, or
(b)in relation to which the undertaking was accepted from the main transgressor under section 7(2A),
was the result of the main transgressor acting in accordance with P's directions or instructions.
(3)But P does not exercise the requisite amount of influence over the main transgressor by reason only that the main transgressor acts on advice given by P in a professional capacity.
(4)Under this section the minimum period of disqualification is 2 years and the maximum period is 15 years.
(5)In this section and section 8ZB “the court” has the same meaning as in section 6; and subsection (3B) of section 6 applies in relation to proceedings mentioned in subsection (6) below as it applies in relation to proceedings mentioned in section 6(3B)(a) and (b).
(6)The proceedings are proceedings—
(a)for or in connection with a disqualification order under this section, or
(b)in connection with a disqualification undertaking accepted under section 8ZC." (Company Directors Disqualification Act 1986, s.8ZA)
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Application for leave to be a director
"(1)In the circumstances specified below in this Act a court may, and under sections 6 and 9A shall, make against a person a disqualification order, that is to say an order that for a period specified in the order—
(a)he shall not be a director of a company, act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court, and
(b)he shall not act as an insolvency practitioner." (Company Directors Disqualification Act 1986, s.1(1))
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"(1)In the circumstances specified in sections 5A, 7, 8, 8ZC and 8ZE the Secretary of State may accept a disqualification undertaking, that is to say an undertaking by any person that, for a period specified in the undertaking, the person—
(a)will not be a director of a company, act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of a court, and
(b)will not act as an insolvency practitioner." (Company Directors Disqualification Act 1986, s.1A(1))
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Secretary of state to appear at hearing of application​
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"(5) On the hearing of an application for leave for the purposes of section 1(1)(a) or 1A(1)(a), the Secretary of State shall appear and call the attention of the court to any matters which seem to him to be relevant, and may himself give evidence or call witnesses." (Company Directors Disqualification Act 1986, s.17(5))
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