DIRECTORS DISQUALIFICATION

Under the provisions of the Company Directors Disqualification Act 1986 (“CDDA”) the Courts have the power to disqualify individuals from inter alia acting as a director of a limited company. Such a disqualification order will also prevent that individual from being involved in the management, promotion or formation of that company. The disqualification order made also covers a number of other activities, including:

• Failing to submit accounts on time
• Failing to submit annual returns on time
• Trading whilst insolvent
• Taking credit when there is no reasonable prospect of creditors being paid

One of the main reasons that an individual may have for creating a limited company is that the company trades with the benefit of limited liability. What this means is that should the company become insolvent then only the assets of the limited company will be used to meet the liabilities in so far that they can, of that limited company, whereas an individual trading either as a sole trader or in his capacity as a member of a partnership places all of his or her assets in jeopardy. The sole trader’s assets, the partnership assets and the personal assets of the individual may also be used to meet the debts incurred as a result of the business activities. For this reason it is necessary to impose a duty on directors not to abuse the limited liability status obtained through the use of a limited company.
Directors can also become personally liable for the 'wilful failure' of their business to operate PAYE on their remuneration.
The Court can make a disqualification order of between 2 - 15 years for unfit conduct.

To discuss Directors Disqualification call Philip Wood on 01782 713700.