The Government has been consulting on the biggest shake-up to director disqualification law in a generation. The proposals, published earlier this year and summarised in our article from April 2026 Proposed Government UK director disqualification reforms 2026. What Directors need to know are wide-ranging, covering everything from automatic bans to new middle-tier sanctions, and from stripping courts of their decision-making role to extending the time the Insolvency Service has to bring cases. The stated aim is to make enforcement faster, cheaper and more effective.
We understand that aim, and we share it. The current regime has real weaknesses, and reform is overdue. But good intentions and good law are not the same thing, and some of what is being proposed could cause serious harm to directors, to fairness and to a legal framework that has taken decades to build. this article sets out our director disqualification reform consultation response in full.
I have spent my career defending directors facing disqualification and advising the professionals who support them. Justice Abbas Mithani KC (the country’s leading authority on director disqualification law) and I have produced a detailed joint response to the Government’s consultation.
in summary, we support several of the proposals and suggest practical improvements to others. But we are clear and direct about the two proposals that concern us most.
- The first would make director disqualification automatic whenever a company is wound up in the public interest, which would mean no court hearing and no finding of misconduct, just an automatic five-year ban.
- The second would remove independent judges from the process altogether and hand the Secretary of State the power to both prosecute and determine the outcome.
These are not technical objections. They go to the heart of what fairness looks like in a legal system, and we argue that both proposals should be rejected.
If you are a director, an accountant, an insolvency practitioner, or anyone who advises businesses, these proposed reforms matter. The rules governing how directors are investigated, sanctioned, and disqualified affect real people, real businesses, and real livelihoods.
The full text of our joint director disqualification reform consultation response is reproduced below. It is written for all readers and uses precise legal language only where necessary, so we hope the substance is accessible and that the stakes are clear.
We encourage you to read it. Whether you are facing director proceedings yourself, advising someone who is, or simply want to understand where this area of law is heading, this response sets out where we stand, what we support and what we believe must not become law.
Joint observations of Abbas Mithani KC & Neil Davies, Solicitor
Director Disqualification Reform Consultation Response: Corporate Civil Enforcement Reforms
Introduction
1.These observations are jointly provided by Abbas Mithani KC and Neil Davies of ND&P Solicitors Limited, trading as Neil Davies and Partners, in response to the Consultation Document entitled “Corporate Civil Enforcement Reforms”, issued in March 2026 (“the Consultation Document”)1. The Consultation Document sets out the Government’s proposals to overhaul the current enforcement processes for tackling miscreant directors and others involved in the mismanagement of companies. This paper constitutes our full director disqualification reform consultation response
(1 We are grateful to Tom Clinton of Neil Davies and Partners for reviewing an earlier draft of this article.)
2. Abbas Mithani KC is a serving judge and was formerly the General Editor of the leading work on directors’ disqualification and insolvency restrictions, Mithani on Directors’ Disqualification (“Mithani”)2, and remains one of the consultants to that work. Neil Davies is the senior partner of Neil Davies and Partners, a firm with a substantial practice in defended disqualification work. He was formerly a panel solicitor for the Insolvency Service in disqualification cases and is one of the advisory editors of the work. These observations are provided in a personal capacity and do not represent the views of the judiciary, nor of any author, contributor or person associated with that work.
(2 Mithani: Directors’ Disqualification, LexisNexis, written in four loose-leaf volumes, also available on CD-rom and online.)
3. Neil Davies hopes to write an article based on this document.
4. We agree with the premise that reform of the enforcement regime is needed to address the conduct of errant directors and others involved in the management of companies. We further agree that the “business as usual” model requires significant revision.
5. Our observations below address each of the proposals in the Consultation Document in turn. Rather than responding to each question individually, we provide our analysis and recommendations by reference to each proposal, which we hope will answer those questions comprehensively.
Proposal 1: Mandatory Disqualification on Public Interest Winding-Up
6. We identify a number of substantial concerns in relation to both the proposed disqualification and the ancillary proposal to determine whether a compensation order should be made and, if so, in what sum. Those concerns are set out below.
7. Proposal 1 would require the winding-up petition under section 124A of the Insolvency Act 1986 (“the IA 1986”) to identify those persons whom the Secretary of State (“SoS”) believes to be directors of the company – whether de jure, de facto, or shadow directors. Once identified, those individuals would be automatically disqualified for a period of 5 years by an order of the Court, without any further finding of misconduct.
8.This type of proposal was considered in a different context by the Cork Report. The White Paper[1] that followed recommended automatic disqualification for directors of companies entering compulsory liquidation. The Insolvency Bill, as originally introduced, went further, providing for automatic three-year disqualification for any director of a company wound up by the court, with power to apply for annulment. That approach was ultimately abandoned. Notably, a cynical director might seek to avoid the consequences of Proposal 1 by the directors or contributories of the company placing the company into compulsory winding-up on other grounds under section 122 of the IA 1986 (but not a voluntary winding-up)[2] before the SoS presents a public interest petition[3].
([1]See “A Revised Framework for Insolvency Law”, Cmnd 9175, 1984. )
(2 See section 116 of the IA 1986. )
([3] Neil Davies’ experience is that the Secretary of State will not ordinarily pursue winding-up proceedings under section 124A where a company has been placed into a creditors’ voluntary liquidation. This creates a pathway to avoid disqualification and compensation under Proposal 1 by the simple expedient of placing the company into a Creditors Voluntary Liquidation, where directors become aware of an impending petition, or where a petition has already been presented but a winding-up order has not yet been made. Unless the Secretary of State alters this approach in such circumstances, Proposal 1 is unlikely to achieve the Government’s intended outcome.)
9.Instructive comparisons may be drawn with section 8ZF of the Company Directors Disqualification Act 1986 (“CDDA 1986”), which applies where HMRC seeks a disqualification order (“D/O”) following a winding-up order under section 85 of the Finance Act 2022. Under that regime, disqualification is mandatory but not automatic: HMRC must still satisfy the court that the statutory conditions are met. Although the court has no discretion as to whether to make a disqualification order, once those conditions are established, it retains a discretion as to the period for which the D/O should be made, which must be for a period of not less than two years and not more than fifteen years. By contrast, Proposal 1 would impose a fixed period of five years’ disqualification upon satisfaction of the prescribed statutory criteria. This represents a significant departure from the approach under section 8ZF, under which the court must make a disqualification order if the requirements of that provision are satisfied, but may determine the appropriate period of disqualification within a two- to fifteen-year range, even in the absence of findings of culpability.
Procedural Difficulties
10.We foresee very substantial procedural difficulties in Proposal 1, including the following:
(a) A D/O takes effect, subject to any other order made by the court, 21 days from when it is made: see section 1(2) of the CDDA 1986. An appeal against the order will not automatically stay it. The director would therefore, remain subject to disqualification unless a stay is granted, which the courts are generally reluctant to do (see, e.g., Secretary of State for Trade and Industry v Bannister [1995] 2 BCLC 271). This would create immediate and potentially severe disruption – particularly for directors involved in solvent companies, which require continuity of management.
(b) Directors would be forced to pursue section 17 permission applications concurrently with winding-up proceedings, placing an unrealistic burden on both the courts and the parties.
(c) If implemented (which we do not recommend), a longer period before the D/O takes effect – we suggest 42 days – and early listing of any section 17 permission application would be preferable, particularly where the director is managing other solvent companies. The risk is that the longer a permission hearing is delayed, the longer the director may continue to act without the protection afforded by the court’s oversight.
(d) The procedural framework for challenging such disqualification is unclear (and is ill-suited for determination by the First-tier Tribunal); it would likely require the development of entirely new processes, ill-suited to the current Part 8 regime.
(e) If implemented (which we do not recommend), a more workable approach would be to require the SoS to bring separate proceedings where disqualification is contested (i.e., simply if the director states that he opposes the disqualification by way of a notice sent to the SoS), thereby preserving the orthodox allocation of the burden of proof and procedural fairness.
Principled and Human Rights Concerns
11. Automatic disqualification in this context raises serious concerns:
– corporate responsibility is often diffuse; disqualification without proof of culpability risks unfairness; and
– there is a real danger of public perception that sanctions are imposed on the unilateral assertion of the Executive, rather than following independent adjudication.
12. Automatic disqualification in these circumstances also risks infringing several Convention rights. As noted in Mithani, Division VIII, those rights include articles 6 (right to a fair trial), 8 (right to respect for private and family life), 14 (prohibition from discrimination)[4] and article 1, Protocol 1 (protection of property). The justification for automatic disqualification is more readily made in the context of bankruptcy, where the individual’s failure to manage their own personal affairs is direct and unambiguous. Corporate misconduct, by contrast, may involve matters of degree and shared responsibility. Any person is entitled to the privilege of trading with limited liability; unless culpability can be demonstrated, that privilege should not be removed automatically.
(4 As regards the operation of article 14 in disqualification proceedings, see DC, HS and AD v United Kingdom [2000] BCC 710, in which the European Court of Human Rights rejected reliance on article 14 in determining whether the proceedings were civil or criminal in character [2000] BCC 710 at 717.)
13. The proposal would also remove important existing safeguards, including the section 16 process and opportunities for directors to respond prior to proceedings.
14.We presume that it will remain open to a director to enter into a disqualification undertaking (“D/U”) under section 8(2A) of the CDDA 1986 at any time prior to the presentation of the winding-up petition, and that any such undertaking would survive regardless of whether the court ultimately makes a winding-up order. This may provide an incentive for directors to offer a D/U for a period of less than five years.
15. Quite apart from the foregoing, we consider it to be constitutionally objectionable for the Executive to determine whether a director should be made subject to a compensation order. The imposition of a liability to compensate creditors is, in substance, the adjudication of a civil obligation and the determination of private rights — functions that lie at the core of the judicial role. It is, therefore, inappropriate in principle for such a decision to be taken by the Executive, even where a right of appeal is provided. Established regimes reflect this constitutional allocation of functions. In the context of D/Os and compensation orders under the Company Directors Disqualification Act 1986, the court alone determines whether a compensation order should be made and, if so, in what amount, having regard to the evidence and the interests of justice. Comparable principles apply across civil and regulatory frameworks: where the consequence is the imposition of a financial liability for the benefit of third parties, the decision is entrusted to an independent and impartial tribunal, not to the Executive.
16. Against that background, a scheme which permits the Executive toact as the sole arbiter of whether a director should compensate creditors represents a marked and unjustified departure from orthodox principle. The availability of an appeal does not cure that defect; it merely shifts the burden onto the affected individual to challenge a determination which ought, as a matter of fairness and constitutional propriety, to be made judicially in the first instance.
17.We note that, other than where a company has been dissolved without going into liquidation, there is currently no jurisdiction to make a D/O under section 6 of the CDDA 1986 following a public interest winding-up unless the company’s assets are insufficient to satisfy its debts and the expenses of the winding-up: see section 6(2)(a) of the CDDA 1986. We consider that section 6 should be amended to permit disqualification proceedings to be brought whenever a company is wound up on public interest grounds, irrespective of solvency.
Such an amendment would bring section 6 into line with the corresponding provisions in sections 6(2)(b) (administration) and 6(2)(c) (administrative receivership, now largely defunct), where no such solvency threshold applies. We go further: we consider that the solvency threshold in section 6 should be removed altogether, so that the trigger for disqualification proceedings arises whenever a company enters liquidation, whether or not it is solvent at the time. This would, helpfully, bring within the scope of section 6 both members’ voluntary liquidations (which may subsequently become insolvent) and winding-up orders made on contributories’ petitions on just and equitable grounds under section 122(1)(g). As Re Samuel Sherman plc [1991] 1 WLR 1070 illustrates, members of a company can suffer grievously from a director’s misconduct and deserve equal protection alongside creditors.
Recommended Alternative Reform
18. We strongly support targeted reform of section 6 of the CDDA 1986 to:
– remove the solvency threshold; and
– permit disqualification proceedings following any winding-up, including public interest cases.
19. This would achieve the stated policy objective without undermining procedural fairness.
20. A potentially less contentious refinement of this proposal would be to introduce, in public interest winding-up cases, a mechanism for imposing an interim disqualification order on a basis analogous to that governing interim bankruptcy restrictions orders under paragraph 5(2) of Schedule 4A to the Insolvency Act 1986. Such an approach would have the advantage of preserving judicial discretion as to whether it is expedient in the public interest to grant such relief, while maintaining the existing burden of proof. It would also avoid a number of the practical and conceptual difficulties identified above.
Conclusion on Proposal 1
21. Proposal 1 should not be implemented. It is unnecessary, procedurally problematic, and constitutionally unsound. Targeted amendment to section 6 of the CDDA 1986 would provide a more proportionate and effective solution
Proposal 2: Director Restrictions Regime
22. We broadly support this proposal (including the automatic 3-year restrictions period) as a proportionate response to lower-level misconduct. It largely follows the model for making bankruptcy restrictions orders in Scotland, as set out in section 159(2) of the Bankruptcy (Scotland) Act 2016.
23. To enhance its effectiveness, we recommend:
– expanding the restrictions to include sector-specific prohibitions (example, not to be a director or be involved in the management of a charitable company or CIO) or restrictions from being involved in specific types of company (e.g., restriction from being a director of a public company with less than £1,000,000 paid up share capital)), i.e. not an “economy-wide” disqualification as currently applies under a D/O or D/U, but a significantly more restricted right to be involved in the management, with the ability of the director to seek the permission of the court to release, discharge or vary those restrictions;
– aligning breach consequences with those applicable to disqualification;
– introducing a formal undertakings regime; and
– linking breach to mandatory (but not automatic) imposition of disqualification.
24. We consider it appropriate, in this limited context, for the SoS to impose restrictions administratively, provided that:
– directors retain a clear right to contest the measure; and
– the burden lies on the SoS to pursue the matter before a court where contested.
25. Internal review mechanisms are sensible, though their perceived independence may be limited.
26. It is essential that courts retain a residual power to impose a Restrictions Order where they refuse to make a D/O on an application for a D/O. This provides flexibility and avoids unjust outcomes, particularly where “limitation periods” for bringing disqualification proceedings have. That power should be exercisable by the court of its own motion, without requiring the SoS to have sought a restrictions order in the alternative. We appreciate that some judges may view this as an easier option than making a D/O. However, if the courts adhere to the language and jurisprudence of the CDDA 1986, the risk of inappropriate use of this residual jurisdiction is low. It would also provide a proportionate outcome when a director successfully argues that his conduct, though culpable, does not meet the threshold for a D/O.
27. We anticipate that directors will seek to challenge D/Os on the basis that a restrictions order would suffice. While the decision to seek a D/O is technically amenable to judicial review (see, e.g., R v Secretary of State for Trade and Industry, ex p Lonrho Plc [1992] BCC 325; and Re Blackspur Group Plc [1998] 1 WLR 422), the residual jurisdiction we propose would, in most cases, render such challenges unnecessary.
28. We do not support “education” as a substitute for restrictions. While it may have a role as a condition of permission under section 17 of the CDDA 1986[5], it cannot fulfil the protective or deterrent function of formal sanctions.
(5 For an example where this was considered but deemed inappropriate on the facts, see Re Four Oaks Building Services Ltd, Ruff v Secretary of State for Trade and Industry (22 September 2004, unreported), at [31], per Her Honour Judge Alton, sitting as a High Court Judge.)
Proposal 3: Secretary of State to Replace Court as Decision-Maker
The Substantive Proposal
29. We strongly oppose this proposal.
30. Disqualification is a serious, quasi-penal sanction. It is constitutionally inappropriate for the Executive to determine both prosecution and outcome. The analogy with criminal proceedings is apt: such a model would collapse the distinction between investigator and adjudicator.
31. The current system – independent judicial determination following application by the Insolvency Service – is a cornerstone of the regime’s legitimacy and international reputation[6].
(6 The current regime, while not perfect, is widely regarded as among the best in the world (see Mithani, A, “Policing directors in offshore jurisdictions” (2025) 4 CRI 95). To dismantle this framework in the manner proposed would be a serious retrograde step.)
32. The proposal risks incompatibility with article 6 of the ECHR and would undermine confidence in the fairness and independence of the process.
Appeals Structure
33. Any attempt to limit appeal rights would be inappropriate and likely unlawful.
34. We do not support transferring the appellate jurisdiction that governs disqualification and related proceedings to the First-tier Tribunal. Disqualification proceedings require specialist expertise in company and insolvency law, which is not readily replicable within the tribunal structure.
35. Existing specialist judges (ICC Judges, specialist District Judges, and the High Court) are the appropriate forum. Reform should instead ensure that all such cases are consistently allocated to specialist lists.
Conclusion on Proposal 3
36. Proposal 3 should be rejected in full. It represents a fundamental and unjustified departure from established constitutional principles.
Proposal 4: Recovery of Assets and the Fairness of Insolvency Distributions
37. We are broadly neutral on the suggestions in this Proposal. The amendments may constitute modest improvements in office-holders’ ability to pursue recoveries for creditors but are unlikely to make a significant overall difference in practice.
38.The real obstacles to effective recovery are twofold:
(a) The absence of sufficient assets in the insolvency estate to fund proceedings; and
(b) The exposure of office-holders to adverse costs orders when pursuing claims in their own names. While ATE insurance and the ability to assign certain such claims have mitigated this to some degree, a significant deterrent remains, compounded by the risk of security for costs orders where the insolvent company (rather than the office-holder) bring a claim against a director.
39. We do not see an easy legislative solution to these difficulties. However, consideration might be given to amending the Civil Procedure Rules to protect claims of this type from being defeated by office-holders being subjected to personal liability and applications for security for costs in appropriate circumstances.
Proposal 5: Director Disqualification for Non-Compliance with HMRC Securities Legislation
40. We agree with the substance of this Proposal. We note the Government’s intention to introduce a provision modelled on section 5 of the CDDA 1986, under which the power to disqualify would be discretionary. We consider this the correct approach, and assume that the maximum period of disqualification would be five years, as is presently the case.
41. Where the Magistrates’ Court does not exercise, or is not made aware of, this discretionary power, we consider that there should be a concurrent power – analogous to section 3 of the CDDA 1986 – for HMRC or the SoS to apply to a civil court for a D/O. Any such extension would, however, need to be carefully drafted to avoid falling foul of the principles set out by His Honour Judge David Cooke in Secretary of State for Business, Innovation and Skills v Weston [2014] EWHC 2933 (Ch), so as not to operate as a collateral challenge to the Magistrates’ Court’s earlier decision. The circumstances in which the civil power would become exercisable must therefore be precisely delineated.
Proposal 6: Expansion and Legal Clarification of Examination Powers for Live Companies
42. We support these proposals, subject to preservation of the usual protections afforded to a defendant or proposed defendant, such as:
– his privilege against self-incrimination; and
– proper limits on the use of compelled evidence.
Proposal 7: Modernisation of Disclosure Gateways
43. We likewise support the substance of this Proposal, subject to the same safeguards as noted in our observations on Proposal 6 above.
Proposal 8: Information-Gathering Powers for Live and Solvent Companies
44. The suggestion that a provision mirroring the power in section 7(4) of the CDDA 1986 should be extended to non-insolvent companies was advocated in Mithani, Division II. We therefore welcome this proposal.
45. In practice, the new power proposed is likely to be exercised more readily and effectively than the existing section 7(4) power. In the case of a live, solvent company, there are no concurrent sections 234–236 IA 1986 powers available to an office-holder, and anecdotal evidence suggests that section 7(4) is subject to significant practical inhibitors. The new power should extend not only to directors and officers of the company, but to any person capable of providing information relevant to a decision whether to bring proceedings under section 8.
Proposal 9: Technical Procedural Rules Changes
46. We fully support the replacement of the affidavit requirement with a witness statement verified by a statement of truth. The requirement to verify evidence by affidavit in disqualification proceedings has long been out of step with modern practice and should have been amended when the equivalent change was made in insolvency proceedings.
47. We also fully support the inclusion of service by electronic means in rule 5(1) of the Disqualification Rules 1987. We go further: we consider that rule 5(1) should be removed altogether and replaced by the default CPR service provisions (including those governing service abroad), which are more comprehensive and better adapted to modern conditions.
48. We draw to the attention of the SoS and HMRC that, notwithstanding its express terms, neither the Disqualification Rules 1987 nor the Disqualification Practice Direction have been extended to apply to proceedings under sections 8ZF and 8ZG of the CDDA 1986. The Disqualification Practice Direction states that it applies to “all disqualification proceedings” (paragraphs 1.1(5) and 1.3), but the absence of any reference to sections 8ZF and 8ZG makes it likely that any disqualification proceedings presently taken under those provisions would be governed by the CPR that apply to ordinary civil claims. This anomaly should be addressed as part of any procedural reform.
Proposal 10: Flexibility in Court Procedure for Disqualification Proceedings
49. We consider that the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 (“the Disqualification Rules 1987”) require revision in several areas. We confine our observations to the matters expressly identified in the Consultation Document.
50. We support modernisation measures, such as witness statements and electronic service. This opportunity could also be used to repeal rule 3(2) of the Disqualification Rules 1987 – which permits the Official Receiver to adduce written evidence via a report and ascribes it prima facie evidential status – although case law has largely rendered that evidential status as otiose[7].
(7 See, by way of example, Re Westminster Property Management Ltd (No 1), Official Receiver v Stern [2000] 2 BCLC 396; on appeal, [2000] 2 BCLC 396. The evidential status purportedly afforded to such a report is clearly an anachronism, as is evidenced by the fact that a similar provision that was included in the former IR 1986 was repealed before the Insolvency (England and Wales) Rules 2016 were enacted and not replaced by those Rules.)
51. We are firmly opposed to any adoption of the Part 7 procedure. The Part 8 framework is not an accident of history; it reflects a deliberate and principled choice to match procedure to the quasi-penal nature of disqualification. The upfront provision of written evidence entails cost and effort, but it purchases procedural discipline: it prevents the interlocutory disputes and disclosure wrangling that are endemic to Part 7 litigation. It also vindicates a right that cannot be traded away for administrative convenience – the right of a director facing quasi-penal proceedings to know, from the outset, the full case and all material relied upon against him. Rule 3(3) of the Disqualification Rules 1987 makes that right explicit. The Rules have generated a mature and sophisticated body of jurisprudence. We have seen no evidence that Part 7 would produce meaningful savings; and we reject the proposition that speculative efficiency gains, even if demonstrated, could justify abandoning a framework that properly protects the position of those subject to it.
Proposal 11: Extension of the Limitation Period
52. We do not support the extension of the three-year limitation period under section 6 of the CDDA 1986. That period was itself extended from two to three years by the Small Business, Enterprise and Employment Act 2015, with effect from 1 October 2015.
53. Three years is a sufficient period within which the SoS should be in a position to decide whether to bring disqualification proceedings. More importantly, directors are entitled to know within a reasonable and defined period whether they may face such proceedings. Where delay has arisen, the SoS is not without remedy: he may apply for permission to proceed out of time under principles that have generally favoured the SoS. Alternatively, he may bring proceedings under section 8 of the CDDA 1986, the scope of which has expanded significantly since its enactment, and which now permits disqualification in a wide variety of circumstances.
54. We are concerned that this Proposal is, at its heart, designed to compensate for the over-stretched and under-resourced state of the Insolvency Service rather than to address a genuine gap in the law. The appropriate response is not to expand the window for bringing proceedings, but for the Government to fulfil its commitment to providing the Insolvency Service with adequate funding – funding already announced in Budget 2025 for this very purpose. Passing legislation to extend the limitation period would be unfair to directors and damaging to certainty in corporate law.
55. We firmly consider that the current three-year period is sufficient and strikes an appropriate balance between enforcement and certainty. The extension would unfairly prejudice directors and appears driven by resource constraints rather than policy necessity.
Conclusion to our director disqualification reform consultation response
56. The Consultation raises important issues and reflects a welcome commitment to reform. However, several proposals – particularly Proposals 1 and 3 – risk undermining fundamental legal principles and should not proceed. We trust this director disqualification reform consultation response assists in that assessment.
57. In summary:
– Proposal 1: Reject (with targeted statutory amendment instead)
– Proposal 2: Support, with enhancements
– Proposal 3: Reject entirely
– Proposals 4–5: Broadly support
– Proposals 6–8: Support with safeguards
– Proposals 9–10: Support (excluding Part 7 reform)
– Proposal 11: Reject
58. There are many further areas of potential reform that, in our view, could considerably enhance the protection of the public from the conduct of errant directors. We have, however, confined these observations to the specific proposals in the Consultation Document, though we mention a few (by no means exhaustive) below. There are also several areas where the fundamental protections afforded to a defendant facing quasi-penal proceedings may be improved. We do not discuss these because they are outside the scope of the Consultation Document.
Non-exhaustive areas where further reform may be considered
i Power of a criminal court to make a D/O
59. We have long considered that the maximum sentence for breach of a D/O or analogous order of two years is insufficient to operate as an effective deterrent. In our view, the maximum period should be increased to five years.
60. In addition, revised sentencing guidelines governing breaches of disqualification and analogous orders are essential[8]. Such guidance would promote consistency in the exercise of these powers by criminal courts and ensure greater alignment with the approach adopted by the civil courts under sections 6 and 8 of the CDDA 1986[9].
(8 The current sentencing guidelines entitled “Breach of disqualification from acting as a director”, which came into effect on 1 October 2018, have been the subject of detailed criticism and need to be revised to allow judges to use their power effectively: see Mithani, A, “The Flawed Approach of the Criminal Courts to the Making of Disqualification Orders – options for intervention? [2023] Crim L. R. 762.)
9 For a detailed analysis of this topic, see Mithani, A, “The Flawed Approach of the Criminal Courts to the Making of Disqualification Orders – options for intervention? [2023] Crim L. R. 762.)
ii Power of a criminal court to make a compensation order
61.Criminal courts have the power to order compensation under the Sentencing Act 2020. They also have power to make a compensation order under sections 15A and 15B of the CDDA 1986 where a D/O is made under section 2 of that Act. Although, in our previous discussions with the Policy Unit of the Insolvency Service, we understand that there is little or no risk of a criminal court being invited to exercise its powers under sections 15A and 15B, we consider that the jurisdiction to make compensation orders under those provisions would be better removed from the criminal courts altogether and vested exclusively in the civil courts[10].
(10 For a detailed analysis, see Mithani, A, “Compensation orders for corporate offences – are the powers of the criminal courts being used properly?” (2024) 45 Company Lawyer 330.)
iii Extending the power to make a D/O under section 10 of the CDDA 1986 to include transaction avoidance
62. Section 10 of the CDDA 1986 permits a disqualification order to be made, either of the court’s own initiative or on application, following a declaration of fraudulent trading under section 213 of the IA 1986 or wrongful trading under section 214 of the IA 1986. The only person with standing to make a free-standing application under section 10 is currently the company’s liquidator. We consider that section 10 should be extended:
(a) to apply to any declaration made by the court under the transaction avoidance provisions of the IA 1986, including (for example) section 238[11];
11We are grateful to the Insolvency Team at Neil Davies and Partners for advancing this suggestion as another way in which the protection of the public can be achieved.)
(b) to enable an administrator, as well as a liquidator, to make a free-standing application; and
(c) to enable the Secretary of State to make such an application.
iv Plugging the Paycheck Services loophole
63. We consider that the conditions for liability under the charging provisions specified in sections 8ZA–8ZE of the CDDA 1986 do not go far enough to address some of the gaps apparent from the decision in Re PaycheckServices 3 Ltd, Revenue and Customs Commissioners v Holland [2010] UKSC 51, [2011] 1 All ER 430, [2011] 1 BCLC 141. In particular, that decision illustrates the ease with which individuals may structure their affairs – especially through the use of overseas entities – so as to avoid findings of de facto or shadow directorship. In our view, legislative amendment is required to close this gap and to ensure that the statutory regime operates effectively to protect the public.
v Permission Applications under section 17 of the CDDA 1986
64. Permission to act under section 17 of the CDDA 1986 appears, over time, to have become more readily available to disqualified directors. In our view, a more structured and restrictive approach is necessary to preserve the protective and deterrent function of disqualification. If permission is granted too readily, the practical effect of a disqualification order is liable to be diminished, with attendant risk to public confidence in the regime. Legislative reform should therefore be undertaken to make the grant of permission more difficult in at least the following cases:
(a) where the director has been disqualified for a period exceeding six years, until at least two years have elapsed from the date of the order;
(b) where the director is subject to a repeat disqualification order, until at least half the period of disqualification has expired; and
(c) where the disqualification arises from allegations of fraud, until at least half the period of disqualification has expired.
Acknowledgement and further work
65. We commend the Insolvency Service for the considerable work and care that have clearly gone into the preparation of the Consultation Document. It is an impressive and thoughtfully structured document, presented with clarity and accessibility. We would welcome the opportunity to engage further with the Insolvency Service and Government in the continued development of these important reforms. We are grateful for the opportunity to contribute our comments at this stage, and hope this director disqualification reform consultation response proves a useful contribution to the Insolvency Service’s continued work.
Abbas Mithani KC and Neil Davies
5 June 2026
Neil Davies
Neil Davies is the senior partner of Neil Davies & Partners (NDP), a nationally recognised specialist in director disqualification defence, insolvency litigation and regulatory disputes. Birmingham based, but acting for directors nationally, with a particular focus on London.
He has acted for directors across the UK for more than 25 years, including in some of the most complex and hard‑fought Secretary of State investigations and trials. Neil is known for his direct, practical approach and for securing successful outcomes in high‑stakes disqualification cases. He is also an advisory editor of Mithani on Directors’ Disqualification, the leading text in the field.
Abbas Mithani KC
Abbas Mithani KC is one of the UK’s foremost authorities on director disqualification law. A serving judge and the former General Editor of Mithani on Directors’ Disqualification, he remains a consultant to the work, which is widely regarded as the definitive resource on the subject. His practice and scholarship have shaped much of the modern understanding of directors’ disqualification, and he brings deep expertise to the analysis of enforcement policy, procedure and reform.
