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.
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).