Bankruptcy orders and the disqualification of directors

Criminal Defence Solicitors
February 11, 2013

In this post we’ll take a look at the potential offences that may be committed by a director if they engage in the management of a company when they are under a bankruptcy order. We’ll therefore look at the following elements:

When may a director be disqualified from taking part in the management of a company?
What are the consequences if they breach this disqualification?
What is the potential sentence if a director is convicted under the CDDA 1986?
What should you do if you’re charged with an offence under the CDDA 1986?

When may a director be disqualified from taking part in the management of a company?

Under sections 11 and 13 of the Company Directors Disqualification Act 1986 (“CDDA 1986”) a person may be disqualified from taking part (directly or indirectly) in the management, formation or promotion of a company at a time when he is either:

Undischarged bankrupt; or
A bankruptcy restriction is in force in respect of him

What are the consequences if they breach this disqualification?

If a person breaches the provisions of sections 11 and 13 of the CDDA 1986 then they may be liable to the following (depending upon whether the case is tried in the Crown Court or the Magistrates’ Court):

On conviction on indictment: to imprisonment of not more than 2 years or a fine, or both; and
On summary conviction: to imprisonment for not more than 6 months or a fine not exceeding the statutory minimum, or both

It’s no defence for a person to state that they were not aware that they were breaching their disqualification order (for example, because they didn’t know of the existence of the order or they thought the order had lapsed) – liability is strict (which means that their intentions didn’t matter). Although a disqualification order prevents persons from getting involved in the management of a company, they should also be careful that they don’t advise on financial matters of the company or on such things as a company restructuring – this would still render them liable under the CDDA 1986.

What is the potential sentence if a director is convicted under the CDDA 1986?

If a director is convicted under the CDDA 1986 (as above) then they can receive a sentence of up to two years in prison or a fine (or both) if convicted on indictment or they may receive a sentence of up to six months in prison or a fine (or both) on summary conviction.

What should you do if you’re charged with an offence under the CDDA 1986?

If you’re charged with an offence under the CDDA 1986 then you should take advice from a criminal defence solicitor (you may also wish to consult an employment law solicitor) – the potential repercussions of such a charge are serious.

Criminal Defence Solicitors are criminal defence lawyers based in the City of London.