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New Director Disqualification Law and Prison

Stop Press! Breach your Director Disqualification Order – and go to Prison for up to 2 Years.

A New Law. The trouble for Disqualified Directors continues to come thick and fast. The Sentencing Council have published new guidelines on sentences for breaching Director Disqualification Orders or Director Disqualification Undertakings.

The guidelines come into effect from 1 October 2018 and certainly increase the possibility for the Court to order lengthier prison sentences, for Directors who default on their disqualifications.

The Law on Director Disqualification

Directors’ Disqualification Orders and Undertakings are more than a mere prohibition on holding the title of ‘Director’ within a company during a period of disqualification. They prohibit any individual from acting within the promotion, formation or management (very widely construed by the Courts) of a company without permission of the court. Therefore, the slightest participation within the company, such as negotiating with a supplier, could potentially put a banned Director at risk of breaching their disqualification.

Prison Time

Section 13 of the CDDA 1986 sets out that a person acting in contravention of a Disqualification Order or who is guilty of an offence under Section 11 CDDA 1986 (i.e. which relates to the prohibition on undischarged Bankrupts from being involved in a company, without Permission of the Court), is liable on Criminal conviction or indictment to:

  • Imprisonment for not more than 2 years or a fine or both and
  • On summary conviction (in the Magistrates Court) to imprisonment for not more than 6 months or a fine or both.

New Sentencing Council Guidelines

The new guidelines will allow the court to determine the breach of a Disqualification Order by 2 levels of culpability and 3 categories of harm, to determine the sentencing range.

For example, if the breach of the Disqualification ban involves dishonesty or a deliberate concealment of disqualified status and such breach results in a significant risk of or actual serious financial/non-financial harm, a Director could expect to receive up to 1 year and 6 months’ in custody.

As was the position before the new guidelines, aggravating and mitigating factors will still be taken into account. Factors such as the breach continuing over a sustained period of time or if the Director was motivated by personal gain will not be taken lightly by the Court.

However, factors such as a genuine misunderstanding of the terms of Disqualification or where there has been voluntary reparation should be made known to the Court as this will certainly have the effect of reducing seriousness.

The well-advised Director still thus has ‘wriggle room’, even when faced with imprisonable offences.

As Specialists in Director Disqualification, we can Help

These guidelines demonstrate the rigidity of a Disqualification Order and the continued crackdown on banned Directors. Many Directors often do not realise the drastic consequences of such and find themselves facing a prison sentence which could easily have been avoided – see below.

Why Run the Risk in the First Place? Apply for Permission to Act as a Director, Whilst Banned

Banned Directors have the ability to apply for permission from the Court to act as a company Director (despite a ban). Our team of director disqualification solicitors are well placed to deal with such applications to Court and we regularly apply for and obtain such orders for disqualified Directors.

If you have any questions regarding your status in a company after being banned as a Director or you wish to apply for Permission to act in such capacity please contact us or call us today on 0121 200 7040 for a FREE, no obligation initial chat. Click here to see some director disqualification testimonials.

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