UK Small Business Enterprise and Employment Act 2015 has varied the rules relating to directors disqualification in the UK and in particualar the implications of involvement in overseas companies for grounds for disqualification in the UK.
Section 104 of the Act introduces a new section 5A to the Company Directors Disqualification Act 1986 (CDDA 1986) which allows the Secretary of State to apply to the court for a directors disqualification order in the UK on the grounds that a director has been convicted of a “relevant foreign offence”. A “relevant foreign offence” is an offence committed outside Great Britain:
(a) in connection with:
(i) the promotion, formation, management, liquidation or striking off of a company (or any similar procedure),
(ii) the receivership of a company’s property (or any similar procedure), or
(iii) a person being an administrative receiver of a company (or holding a similar position), and
(b) which corresponds to an indictable offence under the law of England and Wales.
Section 106 of the Act amends CDDA 1986 to expand the matters which the court must have regard to when determining whether a person should be disqualified as a director. This includes enabling the court to take conduct in relation to overseas companies into account when considering a disqualification application in relation to the conduct of a director of an insolvent company (section 106(2)). The court may also take into account a person’s conduct in relation to more than one company, including any overseas companies, when deciding whether or not to make a disqualification order under section 8 of the CDDA 1986.
The matters to be taken into account in determining unfitness to act etc are set out in a new Schedule 1 to the CDDA 1986. These include:
Matters to be taken into account in all cases
1 The extent to which the person was responsible for the causes of any material contravention by a company or overseas company of any applicable legislative or other requirement.
2 Where applicable, the extent to which the person was responsible for the causes of a company or overseas company becoming insolvent.
3 The frequency of conduct of the person which falls within paragraph 1 or 2.
4 The nature and extent of any loss or harm caused, or any potential loss or harm which could have been caused, by the person’s conduct in relation to a company or overseas company.
Additional matters to be taken into account where person is or has been a director
5 Any misfeasance or breach of any fiduciary duty by the director in relation to a company or overseas company.
6 Any material breach of any legislative or other obligation of the director which applies as a result of being a director of a company or overseas company.
7 The frequency of conduct of the director which falls within paragraph 5 or 6.
Section 108 of the Act amends section 7 of the CDDA 1986 to increase the period of time for applying to the court for disqualification of an unfit director of an insolvent company from two to three years.
The provisions updating the disqualified director’s regime came into force on 1st October 2015.
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