When a director has been found guilty of mismanagement verging on fraud, one of the remedies that the courts can impose is disqualification as a director. But what does this actually mean?
A disqualified director has to abide to the following restrictions:
- While the order or undertaking is in force, it stops a person acting as if they were a director. Accordingly, you cannot avoid the order, or undertaking by simply changing the job description.
- The order or undertaking also means that you must not get other people to manage a company under your instructions. If you do, those people may also be prosecuted for assisting you in contravening the order or undertaking.
What a disqualified director can’t do…
The order or undertaking does not stop you having a job with a company, but unless you have court permission it does stop you:
- Acting as a director of a company
- Taking part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership
- Being a receiver of a company’s property.
You also cannot act as an insolvency practitioner.
In addition to companies, you must not do any of the prohibited acts in relation to the following organisations: Limited liability partnerships (LLPs), Building societies, Incorporated friendly societies, NHS foundation trusts, Open-ended investment companies, Registered societies and Charitable incorporated organisations.
A disqualification order will not stop you carrying on a business as a sole trader. You could also trade in a partnership, but not a Limited Liability Partnership (LLP).
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