A Director Disqualification undertaking can be given either before or after the issue of formal legal proceedings by the Secretary of State.
Prior to the issuing of proceedings, before issuing formal proceedings, the Secretary of State will send a section 16 letter to an individual asking whether he/she will agree to give a voluntary undertaking not to act as a director. It is of course open to that person to challenge the appropriateness of the threatened disqualification by defending the formal legal proceedings, but if the person is unable or unwilling to fight a claim (for example due to financial reasons), then he/she can sign a Disqualification Undertaking which would mean that formal legal proceedings are no longer necessary.
The question of costs is important as if a Disqualification Undertaking is given by a person prior to the issue of legal proceedings, the Secretary of State will nearly always waive any claim for payment of its legal costs.
However, it is important to understand that if a disqualification undertaking is given after the issue of legal proceedings, the person nearly always becomes liable for the Secretary of State’s legal costs up to and including the time it is accepted (although very early on the Secretary of State may waive any such costs to conclude matters quickly).