Directors Duties and Disqualification

Company Directors have a wide range of legal obligations and duties under the Companies Act 2006 and related legislation. 

Directors Duties and Disqualification

Company Directors have a wide range of legal obligations and duties under the Companies Act 2006 and related legislation. 

The burden on Directors to comply with regulatory and statutory requirements has never been greater and failure to fulfil these duties can have serious personal and reputational consequences.

Those alleged to have failed to fulfil duties as a Director may be disqualified from being a Director and lose their livelihood. They can face financial ruin as a result of being forced to pay damages to compensate the company or third parties.

Duties mandated under legislation, which apply to Non-Executive Directors and Executive Directors, include exercising reasonable care, skill and diligence, promoting the success of the company, not  making secret profits, nor having conflicts of interests.

Directors can also be at risk if a company becomes insolvent and their conduct as a Director has been deemed ‘unfit’ by the Insolvency Service.  Unfit conduct includes:

  • Wrongful trading - allowing the company to trade with no reasonable prospect of the company avoiding liquidation
  • Running up debts to the Crown such as VAT and PAYE
  • Preferring one creditor over another resulting in the company becoming insolvent
  • Fraudulent trading – trading with intent to defraud creditors

If a disqualification order is issued, those affected could be banned from acting as a Director for up to 15 years. In the most serious cases involving alleged fraud, Directors may face criminal prosecutions and long prison sentences.

The Khan Partnership has assisted numerous Directors to successfully challenge and mitigate disqualification proceedings under Company Directors Disqualification Act 1986.

In more serious cases where disqualification appears inevitable, we have negotiated the shortest length of disqualification possible. Our team has also helped disqualified Directors gain permission to remain involved in the management of the company whilst disqualified.

Our serious fraud solicitors have advised directors being prosecuted under the Fraud Act 2006, securing successful outcomes for clients.