Director Disqualification

The order may come from a court, a company regulator or, in some systems, automatically after a defined event such as a conviction for fraud or repeated failure to file accounts. Grounds usually include fraud, trading while insolvent, serious breaches of duty and persistent default on filings. Periods vary by country and by seriousness, and may run from a couple of years to well over a decade. During that time the person cannot be appointed as a director or take part in running a company, and acting regardless can be a criminal offence. Some regimes allow the person to apply for permission to act in particular cases. The sanction protects creditors, investors and the public rather than punishing the company itself. Boards and banks check disqualification registers when appointing directors and during fit and proper reviews.

A court examines a retail company that collapsed owing a large sum to suppliers. It finds that its two directors kept trading for months knowing the firm could not pay its debts. Each is disqualified for seven years, and the public register is updated so banks and future boards can see the order.