Authors: Neil Davies and Tom Clinton
This article originally appeared in Corporate Rescue and Insolvency, Lexis Nexis August 2026, pp 123–126.
In June 2026, Neil Davies and Abbas Mithani KC published a detailed response to the Government’s Corporate Civil Enforcement Reforms consultation, opposing two of its key proposals to make director disqualification automatic and to hand the decision from the courts to the Secretary of State. In this companion article, Neil and Tom Clinton develop the constitutional argument behind that opposition.
Key points
- The government’s proposed Corporate Civil Enforcement Reforms promise a much-needed overhaul of the directors’ disqualification regime. Much of the consultation deserves support. Three proposals, however, raise significant concerns.
- Proposal 1 would make disqualification automatic on a public-interest winding up, without proof of misconduct; Proposal 3 would transfer the disqualification decision to the Secretary of State; and Proposal 11 would extend the “limitation period” under s 6 of the Company Directors Disqualification Act 1986. Each undermines principles that have traditionally underpinned the regime – culpability, independent adjudication and procedural fairness – while the compensation-order element raises a distinct constitutional objection.
- This article argues that the government’s objectives may be better achieved through the targeted amendment of s 6, supported by an interim disqualification power.
A welcome ambition and a necessary caution
In March 2026, the government published Corporate Civil Enforcement Reforms (the Consultation), setting out proposals to overhaul the processes for tackling miscreant directors and others responsible for the mismanagement of companies. Few practitioners who act in this field would quarrel with the premise. The “business as usual” model is in real need of revision, and the Consultation reflects a genuine and welcome commitment to reform.
Yet ambition in enforcement is not the same as improvement in enforcement, and some of the means the Consultation proposes would come at a price its own objectives do not require. Two proposals in particular ought to trouble anyone who values the legitimacy of the directors’ disqualification regime. Proposal 1 would make disqualification automatic on a public-interest winding-up, without any finding of misconduct. Proposal 3 would transfer the decision whether to disqualify from the court to the Secretary of State. A third, Proposal 11, would extend the limitation period for bringing proceedings under s 6 of the Company Directors Disqualification Act 1986 (CDDA 1986). Each, for different reasons, warrants reconsideration.
The argument that follows begins with first principles, because everything turns on them.
First principles: a quasi-penal sanction
Disqualification is not a licensing decision, nor an administrative tidying-up of the qualifications to be a director. It has repeatedly been recognised as a serious sanction with a quasi-penal character, affecting an individual’s ability to earn a living in the corporate sector and carrying significant reputational consequences. That characterisation is not a rhetorical flourish; it is the organising idea of the whole regime, and it has three consequences that recur throughout the analysis below.
First, because the sanction is penal in substance, it should not be imposed without culpability being established by a proper due process. Second, because it determines a person’s rights and status, the decision to impose it should be made by an independent and impartial tribunal, not by the body that investigates and prosecutes the case. Third, because it is grave, the procedure leading to it should be fair and, in particular, should secure to the person affected the right to know, from the outset, the full case against them. Measured against those three requirements – culpability, independent adjudication, and procedural fairness – Proposals 1 and 3 are found wanting.
Common ground: where the reforms deserve support
Before turning to the proposals that cannot be supported, it is right to record how much of the Consultation is sensible: the authors support, or raise no objection to, the greater part of it. Proposal 2, the new director restrictions regime, is a proportionate answer to lower-level misconduct, broadly modelled on the Scottish approach to bankruptcy restrictions (see Pt 13 of the Bankruptcy (Scotland) Act 2016). It would be strengthened by sector-specific restrictions or restrictions on being involved in specific types of companies, together with a formal undertakings regime, breach consequences aligned with those for disqualification, and – importantly – a residual power for the court to impose a restrictions order of its own motion where it declines to disqualify.
Proposal 5, disqualification for non-compliance with HMRC securities legislation, is also to be welcomed: a discretionary power modelled on s 5 of the CDDA 1986 is the right approach, ideally coupled with a concurrent power for HMRC or the Secretary of State to apply to a civil court, carefully drawn so as not to operate as a collateral challenge to the Magistrates’ Court decision under s 5 (cf. Secretary of State for Business, Innovation and Skills v Weston [2014] EWHC 2933 (Ch)). The recovery measures in Proposal 4 are modest but unobjectionable. The examination and information-gathering powers in Proposals 6 to 8 are supported, subject to the usual protections for those under investigation – in particular, the privilege against self-incrimination and proper limits on the use of compelled evidence. The extension of a CDDA 1986 s 7(4)-type power to live, solvent companies has long been advocated (see Mithani: Directors’ Disqualification, Division II, passim) and would be a welcome addition to the current regime.
The procedural modernisation in Proposals 9 and 10 is overdue: the replacement of the affidavit requirement with a witness statement verified by a statement of truth, and the express provision for electronic service, should have come long ago. One line, however, must be held. Any steps to transfer the proceedings from Pt 8 to Pt 7 would constitute a retrograde measure. Pt 8 is not an accident of history but a deliberate choice, matching procedure to the quasi-penal nature of the sanction; it secures to the director the right to know, from the outset, the full case and all the material relied upon against them (r 3(3) of the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987). Speculative efficiency savings, even if they could be demonstrated, would not justify trading away that protection.
However, the following proposals are those with which the authors cannot agree. The proposal numbers correspond to those in the Consultation Document.
Proposal 1: automatic disqualification on a public-interest winding-up
Proposal 1 would require a petition to wind up a company in the public interest under s 124A of the Insolvency Act 1986 (IA 1986) to identify those whom the Secretary of State believes to be its directors, whether de jure, de facto or shadow. Once identified, those individuals would be disqualified automatically for five years by order of the court, without any further finding of misconduct.
Automatic is not the same as mandatory
It is important to be precise about what is proposed, because the Consultation elides a distinction that matters. A useful comparison is s 8ZF of the CDDA 1986, which applies where HMRC seeks disqualification following a winding-up order under s 85 of the Finance Act 2022. There, disqualification is mandatory but not automatic: HMRC must still satisfy the court that the statutory conditions are met. The court has no discretion as to whether to make an order once those conditions are met, but it retains a discretion as to the period, which must fall between two and 15 years. Proposal 1 is of a different kind. It fixes a five-year period on satisfaction of the statutory criteria, with no inquiry into culpability and no judicial discretion as to length. That is a marked departure from the orthodox model, in which even a mandatory order leaves the court to calibrate the sanction to the conduct.
An idea already tried and abandoned
The proposal is not new, and its history is instructive. Automatic disqualification of this kind was considered in the wake of the Cork Report. The 1984 White Paper recommended automatic disqualification for directors of companies entering compulsory liquidation, and the Insolvency Bill, as originally introduced, went further still, providing for automatic three-year disqualification for any director of a company wound up by the court, with a power to apply for annulment (see A Revised Framework for Insolvency Law, Cmnd 9175 (1984), following the Cork Report, Cmnd 8558 (1982)). That approach was ultimately abandoned. While the reasons for the abandonment were no doubt multifactorial, the legislative history demonstrates longstanding concerns about automatic sanctions imposed without proof of fault.
Defeated by the very directors it targets
There is also a practical irony. A director who sees a public-interest petition coming can side-step Proposal 1 altogether. By procuring the company’s compulsory winding up on other grounds under s 122 of the IA 1986, or – more realistically – by placing it into a creditors’ voluntary liquidation before the Secretary of State presents a s 124A petition, the forewarned director escapes (in the authors’ experience the Secretary of State will not ordinarily pursue a s 124A petition once a company has entered a creditors’ voluntary liquidation, and s 116 of the IA 1986 leaves that route open even after a petition is presented but before a winding-up order is made). The measure would thus tend to catch those who fail to anticipate the consequences of the proposal, while a more informed director may, in some circumstances, avoid its practical effects. Proposal 1 may, therefore, fall short of achieving the Government’s intended outcome.
Procedural difficulties
The procedural consequences are formidable. A disqualification order takes effect, subject to contrary order, 21 days after it is made, and an appeal does not automatically stay it; the courts are generally reluctant to grant a stay (Secretary of State for Trade and Industry v Bannister [1995] 2 BCLC 271). For a director engaged in the running of other solvent companies that require continuity, the disruption would be immediate and potentially severe. Directors would be driven to bring applications for permission to act under s 17 of the CDDA 1986 concurrently with the winding-up proceedings themselves, an unrealistic burden on courts and parties alike. The framework for challenging an automatic order is, moreover, unclear: it is ill-suited to the existing Pt 8 regime and plainly not a matter for the First-tier Tribunal.
If, contrary to the argument advanced here, some form of such a mechanism were nevertheless adopted, the least objectionable approach would be to extend the period before the order takes effect, perhaps to 42 days; provide for the expedited listing of any permission application; and – most importantly – require the Secretary of State to commence separate proceedings whenever a director gives notice that the proposed disqualification is opposed. Such a scheme would at least preserve the orthodox allocation of the burden of proof and retain a measure of procedural fairness.
Principle and the Convention
Beneath the procedure lie deeper objections. Corporate responsibility is frequently diffuse; to disqualify without proof of culpability is to risk real unfairness and to invite the perception that a serious sanction has been imposed on the Executive’s unilateral assertion rather than by independent adjudication. There is also a Convention dimension. An automatic disqualification of this kind may engage, among others, Arts 6, 8 and 14 of the European Convention on Human Rights and Art 1 of Protocol No. 1 – with Art 14 potentially engaged by the differential treatment of directors disqualified through public-interest winding-up proceedings compared with those disqualified by other routes (see Mithani, Division VIII, passim). The justification for automatic restriction is far more readily made in bankruptcy, where the individual’s failure to manage their own affairs is direct and unambiguous (DC, HS and AD v United Kingdom [2000] BCC 710, 717). Corporate misconduct, by contrast, is a matter of degree and of shared responsibility. The privilege of trading with limited liability should not be withdrawn automatically; absent demonstrated culpability, it should not be withdrawn at all. Proposal 1 would also sweep away existing safeguards, including the s 16 notice process and the opportunity for directors to make representations before proceedings are brought.
The better route: targeted reform of s 6
None of this is to deny the government its objective. The legitimate aim behind Proposal 1 is a surer and swifter route to disqualifying the directors of companies wound up in the public interest. That aim can be met without automatic sanction, without displacing the court, and without offending principle – by a modest amendment to s 6 of the CDDA 1986.
As the law stands, save where a company has been dissolved without going into liquidation, there is no jurisdiction to disqualify under s 6 following a public-interest winding up unless the company’s assets are insufficient to meet its debts and the expenses of the winding up. That solvency threshold in s 6(2)(a) is an anomaly: no equivalent threshold applies to administration under s 6(2)(b) or to administrative receivership under s 6(2)(c). Section 6 should be amended to permit disqualification proceedings whenever a company is wound up on public-interest grounds, irrespective of its solvency.
The better course is to go further and remove the solvency threshold altogether, so that the trigger for proceedings under s 6 is simply that the company has entered liquidation, whether or not it is then solvent. That would bring within the section both members’ voluntary liquidations, which may later prove to be insolvent, and winding-up orders made on contributories’ just and equitable petitions under s 122(1)(g) of the IA 1986. As Re Samuel Sherman plc [1991] 1 WLR 1070 illustrates, members may suffer grievously from a director’s misconduct and deserve protection alongside creditors. This reform would achieve the policy objective while leaving intact the requirements of culpability, judicial determination and a fair procedure.
For cases where the public interest calls for swifter protection, a less contentious refinement is available: an interim disqualification order in public-interest winding up cases, modelled on the interim bankruptcy restrictions order under para 5(2) of Sch 4A to the IA 1986. Such a mechanism would preserve the court’s discretion as to whether interim relief is expedient in the public interest, maintain the existing burden of proof, and avoid the practical and conceptual difficulties that attend Proposal 1. It would give the government the speed it seeks without the price it should not wish to pay.
Proposal 3: the Secretary of State as decision-maker
If Proposal 1 blurs the line between the Executive and the court, Proposal 3 erases it. It would make the Secretary of State the decision-maker on disqualification, displacing the court altogether. This proposal raises fundamental concerns and should be reconsidered.
The objection is constitutional and simple. Disqualification is a serious, quasi-penal sanction. It is inappropriate for the Executive to determine both the bringing of the charge and its outcome. The criminal analogy is apt: it would be unusual in the domestic legal system for the prosecuting authority also to determine the outcome of the proceedings. Proposal 3 would substantially narrow the distinction between the investigator and adjudicator. The present model – independent judicial determination on the application of the Insolvency Service – is not an inefficiency to be engineered away. It is the cornerstone of the regime’s legitimacy and of its international standing, the UK system being widely regarded as among the best of its kind (A Mithani, ‘Policing directors in offshore jurisdictions’ (2025) 4 CRI 95). To dismantle it in the manner proposed would be a serious retrograde step, and one carrying a real risk of incompatibility with Art 6.
The same instinct that animates Proposal 3 surfaces in the suggestions on appeals. Any attempt to curtail appeal rights would be both inappropriate and, very probably, unlawful. Nor should the appellate jurisdiction be transferred to the First-tier Tribunal (FTT). Disqualification proceedings demand specialist expertise in company and insolvency law that is not readily replicated within the tribunal structure. The appropriate forum already exists: ICC judges, specialist District and Circuit judges, and High Court judges. Reform should not take the form of conferring this type of insolvency and companies’ jurisdiction on the FTT, but of consistently allocating such cases to the specialist lists within the existing court structure that are equipped to hear them. The FTT’s purported advantage, which partly underpins the proposal – a cost-neutral jurisdiction – can be replicated within the court system by amending the costs provisions of the CPR.
The compensation order: a constitutional objection
A separate constitutional concern arises from the ancillary proposal that the Executive should determine whether a director should be subject to a compensation order. To impose a liability to compensate creditors is, in substance, to adjudicate a civil obligation and to determine private rights – a function lying at the very core of the judicial role. It may be constitutionally problematic for the Executive to make that determination, even where a right of appeal is provided. Established regimes recognise as much: under the CDDA 1986, it is the court alone that decides whether a compensation order should be made and, if so, in what sum, on the evidence and in the interests of justice. The availability of an appeal shifts onto the affected individual the burden of challenging a determination that ought, as a matter of fairness and constitutional propriety, to have been made judicially in the first place. It is constitutionally problematic for the Executive to make that determination: the availability of an appeal does not cure the vice if the initial determination is itself made by the wrong decision-maker.
Proposal 11: extending the “limitation period”
Proposal 11 would extend the three-year “limitation period” under s 6 of the CDDA 1986 and presumably the other charging provisions of the CDDA 1986 where such a limitation period is imposed. That period was itself raised from two years to three by the Small Business, Enterprise and Employment Act 2015, with effect from 1 October 2015, and three years is ample. Directors are entitled to know, within a reasonable and defined window, whether they may face proceedings of this gravity. Where delay does arise, the Secretary of State is not without remedy: he may seek permission to proceed out of time, under principles that have generally favoured him (see, for example, Re Probe Data Systems (No 3) [1992] BCC 110), or proceed under s 8, whose scope has expanded considerably since enactment.
One concern is that the proposal may reflect operational pressures within the Insolvency Service rather than any substantive deficiency in the statutory framework. If that is so, the answer is not to enlarge the window for proceedings at the expense of directors’ certainty, but to fund the Service to use the powers it already has – additional funding having been announced in the October 2024 Budget and subsequently for enforcement activity of this kind. Legislating to extend limitation would be unfair to directors and corrosive of certainty in corporate law.
Conclusion
The Consultation deserves credit for its seriousness and its care, and reform of the enforcement regime is genuinely needed. But the measure of good enforcement reform is not how quickly the system can disqualify a director; it is how surely it can do so while keeping the decision where it belongs. Proposals 1 and 3 may prioritise administrative efficiency over safeguards traditionally associated with culpability, independent adjudication and procedural fairness – the three things that make disqualification both fair to the individual and respected by the public. Proposal 11 appears directed, at least in part, towards addressing operational pressures through a change in the law that may reduce certainty for directors.
The paradox is that the government can have most of what it wants by the more modest path. Strip the solvency threshold out of s 6, add an interim disqualification mechanism for public-interest cases, and resource the Insolvency Service to wield the powers already on the statute book. That would strengthen the protection of the public without weakening the constitutional foundations on which the regime’s authority rests.
Reform is both necessary and desirable, but it should preserve the distinction between executive enforcement and independent adjudication.
The views expressed in this article are those of the authors alone and given in their personal capacity.
Further reading
- Lexis+® UK: Restructuring and Insolvency: Practice note: Disqualification under s 6 of the Company Directors Disqualification Act 1986 – Part 1: the process and procedure.
- Lexis+® UK: Restructuring and Insolvency: Practice note: Disqualification under s 6 of the Company Directors Disqualification Act 1986 – the process and procedure: Part 2 – the evidence.
- Lexis+® UK: Restructuring and Insolvency: Practice note: Disqualification under s 6 of the Company Directors Disqualification Act 1986 – the process and procedure: Part 3 – procedural issues and Undertakings and Carecraft settlements.
About Neil Davies
Neil Davies is a director and CEO of Neil Davies and Partners, a specialist Insolvency and Business Recovery practice. Neil has 32 years’ experience in insolvency-related work. He heads up a team of 10 solicitors specialising in insolvency, director disqualification and related matters, representing licensed insolvency practitioners, stakeholders, creditors and directors. He is a regular speaker on such matters. Neil is also an advisory editor of Mithani: Directors’ Disqualification. Email: neild@ndandp.co.uk
About Tom Clinton
Tom Clinton is an assistant solicitor in Neil Davies and Partners’ Insolvency Department.
About Neil Davies & Partners
Neil Davies & Partners (NDP) is a specialist commercial law firm based in the West Midlands, providing expert legal advice to businesses, directors and insolvency practitioners across the UK and internationally. The firm focuses on complex business disputes, with particular expertise in director disqualification, insolvency litigation, insolvency and restructuring, commercial litigation, regulatory disputes and business crime. Founded in 2007, Neil Davies & Partners is known for its partner-led approach, practical commercial advice and strong track record in helping clients navigate high-stakes legal and financial challenges through tailored, cost-effective solutions.
