New legislation on company directors

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By Chris Jones

One of the last Acts that Parliament passed before it was dissolved was the Small Business, Enterprise and Employment Act 2015 (‘SBE’ for short). This brings in various measures with regard to employment, company transparency and insolvency, in particular Directors’ Disqualification – which is what I want to cover. Anyone with any interest in corporate governance (so that should mean anyone who is a director of a limited company or pursuing a limited company and hence its directors) should take note.

The main piece of legislation dealing with disqualification from being a director of a company is the Company Directors Disqualification Act 1986 (‘CDDA’). That enables the Courts, on the application of the Secretary of State, to disqualify errant directors for anything between 2 and 15 years. The test is that the director in question is unfit to be a director and the grounds mostly centre around his/her role in the downfall of a particular company or companies, e.g. misapplying company money, taking deposits when they knew they wouldn’t be able to fulfil orders, through to outright fraud.

The SBE now extends the reach of the CDDA in several ways:

Of course, most directors I know are happy that they won’t fall foul of these provisions but even so, even transactions which seem innocuous at the time have attracted the ire of the Disqualification Unit later on (not that they’re always successful). Similarly, creditors have often felt disenfranchised in those cases where directors and their associates have clearly caused loss and seemingly got away with it, so this new Act should hopefully address that.

 


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