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Director Disqualification and the Role of the Director

Drector Disqualification Masterclass. 

Earlier this year NPD jointly presented a Director Masterclass event, on behalf of The IoD (West Midlands branch) and Birmingham Law Society and billed as an event for new directors, or soon to be appointed directors, in particular. The speakers were Neil Davies, a director of Neil Davies and Partners, specialists in the areas of directors’ duties and obligations, and David Oxtoby previously a Senior Lecturer in Strategic Management and Corporate Governance at Wolverhampton Business School, and currently a non-executive director and a teacher of corporate governance at Birmingham Business School.

Less than 10% of Directors receive any training for the role

Most directors are appointed (or become directors) with little or no formal training, especially in the SME sector, where most directors are. As David pointed out, the duties and responsibilities of directors are many, and yet he estimated that fewer than 10% of directors go on any type of course to prepare them for their new responsibilities.

Director Disqualification

Neil Davies took the lectern first and focused on the area of director disqualification and what can happen when directors do not meet their legal responsibilities. Most of us only hear about the occasional high profile director disqualification, but the truth is that director disqualification orders are on the rise in the UK and the numbers are greatest in the SME sector. This trend is expected to continue now that the Small Business, Enterprise and Employment Bill, which proposes tougher sanctions on directors in the area of director disqualification, has received Royal Assent.

How Long Can a Director Disqualification Period Last For?

Neil, who acts for and against directors in disqualification cases, briefly talked about the legal definition of a director, what a director’s duties are and to whom and what the consequences of breaching these duties can be. In serious cases, director disqualification can result in a disqualification period of up to 15 years and imprisonment too, with collateral damage to the disqualified director’s family and reputation. Clearly, knowing and understanding what a director’s duties and responsibilities are is of great importance to new and existing directors.

Importantly, being a director of a limited company does not necessarily limit the liabilities of, or protect, a director from prosecution following a breach of responsibilities. As Neil pointed out, the ‘corporate veil’ is not the protection it once was.

The Duties and Responsibilities of Directors

David spoke interestingly and from great experience about the key duties, roles and responsibilities of directors. Most interesting of all, however, was his point that many directors in the SME sector, where most of the UK’s directors reside, often find themselves having to learn on the job and make things up as they go along, to a greater or lesser extent. This is especially so when first appointed, because they haven’t received any specific training in the role and responsibilities of being a director. This can, and does lead to some serious consequences, as both David and Neil see all too frequently.

Ultimately, this is where the IoD can come in, because one of its main functions is in educating and developing directors. It runs many courses to this end, but the“Role of The Director and the Board” course delivers invaluable training into key areas such as the duties, roles and key legal responsibilities of directors and an appreciation of the differences between management, direction and ownership. For further information on this course, contact the IoD West Midlands’ Regional Director, John Phillips, on  john.phillips@iod.com.

If you are Facing Director Disqualification, NDP can help

If you are facing director disqualification proceedings, and need some help and advice, call us on 0121 200 7040, or contact us, for a free initial chat.

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