Home » News » News about NDP » Stop Press: Director client granted Permission to continue to act as a Director, following a Director Disqualification Undertaking of 11 years – January 2024

Stop Press: Director client granted Permission to continue to act as a Director, following a Director Disqualification Undertaking of 11 years – January 2024

“We believe this outcome is a first for an 11-year disqualified Director to receive Permission to continue to act as a Director.”

Overview of this Director Disqualification case*

This was a truly outstanding outcome for our Director client. A fuller note of this case will follow. We are not aware of any earlier instance of a Director disqualified for 11-years successfully applying for Permission to continue acting as a Director and in the continued management of a limited company entity. At this early point, we report on how we applied for and secured Permission for our Director client to continue acting as a Director of a company, following his having signed a Disqualification Undertaking for a higher bracket director disqualification period of 11-years in respect of his conduct in his earlier failed company.


The underlying disqualification case involved a serious allegation of incidental involvement by the Director in Fraud against HMRC. The events complained of in the underlying disqualification action took place between 2004 to 2006. Our client had run his successful trading company, in respect of which he now sought Permission to act, since the late 1990s.

That company would likely fail unless he obtained Permission from the Court. His employees would lose their jobs.

Law: the application to Court for Permission by the Director

Pursuant to section 17 of the Company Directors Disqualification Act 1986 (‘CDDA’), an individual may apply for Permission from the Court, to continue to act as a Director of a company and/or be involved in the management of a company, despite having been disqualified as a Director.

When and in what circumstances will the Court grant Permission?

The Court has a wide discretion to grant Permission (on application to it by the Director) including subject to the imposition of Conditions, having considered a number of competing factors, with each Permission application dealt with on a case-by-case basis. An objective in granting Permission is for the Court to ensure the Public Interest is adequately protected if Permission is granted.

Details of this Director Disqualification case

The main areas of the Insolvency Service (‘IS’) investigation, as per the Disqualification Undertaking agreed to by NDP’s client in this case, were allegations of involvement in Fraud against him with the IS, alleging his involvement in a Missing Trade Intra Community Fraud (‘MTIC’) back in 2006. An MTIC Fraud is a form of Tax fraud that most commonly occurs in cross-border transactions.

The final Director Disqualification hearing in November 2023 loomed large

Our Director client faced a stark choice. Risk financial ruin by unsuccessfully opposing the Director Disqualification case at final hearing in November 2023, or agree to be disqualified (unjust as that felt to our client) and then seek Permission. This dilemma is one commonly faced by Directors.

How best to proceed?

It remained our client’s view that he was wholly innocent of the Unfit Conduct allegation made against him by the IS. In the years before and since 2006 and the events complained of, our Director client had run a successful trading company that paid its Taxes and employed a number of people. His disqualification threatened the very existence of that ongoing successful company.

The most sensible course for our client to follow with the Trial of that Director Disqualification action on the immediate horizon, was for him to accept the offered Disqualification Undertaking (i.e. a ban by consent) and then apply to the Court and seek Permission for him to continue to act as a Director of his ongoing company. It was a difficult decision. Obtaining Permission from the Court would be anything other than straightforward.

Making the Permission application – time was of the essence

Following his having signed and returned the Director Disqualification Undertaking, it was imperative that a Permission application was issued and pursued by the Director, because Disqualification Undertakings take effect 21 days after they have been signed off and agreed by the IS.

Therefore, the application to Court seeking Permission and all the necessary evidence had to be drafted urgently and filed and served and a Court hearing had to happen, all before that ban took effect.

NDP commenced work immediately, preparing the Application Notice and detailed written evidence in support, all of which was filed with the Court and served on the IS in a matter of days. As expected, this was anything but a straightforward application.

Once issued out of Court, a hearing was listed the following week to consider whether Permission should be granted and if so, subject to what Conditions. The IS should be commended here for the collaborative way it assisted in the listing and hearing of the Permission application.

The objective

The client having acknowledged the seriousness of the allegations against him, reflected in the lengthy 11-year disqualification period, his focus now switched to the need for him to continue as a Director of his ongoing, long established and successful business.

Safeguards and Conditions proposed to protect the Public Interest

Safeguards were proposed by NDP on behalf of our client to satisfy any concerns the Court may have about ensuring the Public Interest was adequately protected.

Conditions imposed as a condition of the Director obtaining Permission

As is usual in such Permission applications, a negotiation takes place between us (as the Applicant’s Solicitors) and the IS (who represent the SOS and the Public Interest in such cases) as to what Conditions (if the Court felt Permission should be granted) should be imposed by the Court.

Permission granted

The Court on these specific facts granted Permission to act to our client, until a hearing in June 2025 when that matter will be reviewed.

In this case, the Court imposed the following Conditions as part of the successful Permission application:

  • The appointment of 2 other Directors to the company to include the appointment of a qualified Accountant as financial Director of the company.
  • The company agreed to move its bookkeeping and accounting systems to the online accounts package ‘Quickbooks’, so as to give full and unrestricted access to the company’s external Accountants to the company’s books and records.
  • Monthly Management Accounts to be prepared by the external Accountants and provided to the Directors within 4 weeks of each month end.
  • The Accountants to report to the Directors of the company any concerns or defects in the finances of the company which they have whilst examining the accounting records of the company during the process of preparing Management Accounts and shall require that such concerns or defects are rectified.
  • Annual Returns and Statutory Accounts for the company to be filed at Companies House by their due date for filing.
  • All returns to HMRC for VAT, PAYE, NIC and CT for the Company to be submitted by their due date and any payment due in respect of any liability for such VAT, PAYE, NIC and CT to be paid on or before the due date of payment.

The key

Whenever Permission is granted by the Court, that Permission will automatically lapse if any condition is breached by the Director, leaving the defaulting Director in breach of the Disqualification Order – a Civil and Criminal offence. Great care is thus needed to ensure Conditions are observed to the letter and not breached.

An outstanding result

We are not aware of a case where Permission has been successfully applied for in a case involving an 11-year disqualification. A key factor in this case was for the Director to explain his position very carefully to the Court in his written evidence. Every case turns on its own facts. Our role was to ensure all relevant facts and considerations were before the Court.

Overview of this Director Disqualification case

We deal with a number of Permission applications every year following Director Disqualification Investigations conducted on behalf of the Secretary of State. Such an approach allows the Director to deal with allegations of ‘Unfit Conduct’ made against him/her, without the need for an expensive and uncertain Court proceedings.

It is imperative for work to be undertaken swiftly and efficiently to ensure that all matters are completed in a timely manner. As ever, the devil is in the detail of the drafting of the evidence in support of the application for Permission and the subsequent negotiation/discussion with the IS, in the period leading up to the Court hearing of the Permission application.

In our experience of this specialist subject area, any case involving a disqualification period in the higher bracket (11 to 15 years) has been viewed as meaning it is extremely difficult for the Director to obtain Permission to continue to act. On the facts of this case, the seriousness of the Unfit Conduct allegation set out in the Disqualification Undertaking, made it even more difficult.

What does this outcome mean?

This case may well serve as a seminal moment in section 17 Permission applications, with the Court showing a willingness towards allowing Directors to continue to act where there is a genuine need for the Director to continue as a Director and where appropriate safeguards/Conditions are put in place to protect the Public Interest.

Cautionary note

The Director must never assume Permission will be granted by the Court. The Court process is not a rubber-stamping exercise. The Court will look critically at each case on its own merits.

(*Article by: Neil Davies, Solicitor and Managing Director of NDP and Contributory Editor to ‘Mithani: Directors’ Disqualification’ – the leading work on Director Disqualification law and practice; and by Harman Randhawa, Paralegal at NDP, who had conduct of the Permission case from beginning to end.

With grateful thanks for the excellent work of Martin Budworth, Barrister of Kings Chambers who advised in this case.

Neil Davies co-authored an article on this topic that appeared in ‘Corporate Recue and Insolvency’ in February 2023.

Leave a comment