The time limit for director disqualification can vary, with a range of between 2 and 15 years. Being a company director comes with a lot of legal responsibilities, and if you fail to meet these responsibilities, you may face disqualification from serving as a director.
There are several common reasons for director disqualification, including insolvency of the company, personal bankruptcy, misconduct, fraud, and criminal behaviour.
The specific time frame is determined based on the severity of the offense, with shorter disqualification periods being assigned for less serious misconduct and longer periods being reserved for more severe breaches such as fraud or criminal behavior.
It is important to understand the potential consequences of disqualification and take steps to avoid it in order to minimise the impact on your personal and professional life. This can be a major blow, so it’s important to be aware of the director disqualification time limit and take steps to avoid it.
How long does director disqualification last?
If you don’t meet your legal responsibilities as a company director, you could face disqualification for a period of time ranging from 2 to 15 years. There are three tiers of director disqualification, depending on the severity of the offense:
- Disqualification for reckless or negligent conduct as a director (2-5 years)
- Disqualification for serious misconduct which is more detrimental to the public interest (6-10 years)
- Disqualification for the most severe breaches, such as fraudulent or serious criminal behavior (11-15 years)
Under the Insolvency Act 2020, you may be able to receive a reduced penalty if you admit to wrongdoing. However, it is highly recommended that you seek legal advice to help you navigate this process.
There are several actions that could trigger disqualification as a director, including:
- Being the director of any UK registered company
- Being the director of any company based abroad that operates within the UK
- Being involved in the formation, marketing, or management of a company
- Acting as a company director (e.g. hiring staff, making executive decisions)
- Appointing someone else to manage a company under your guidance
Failure to adhere to these rules could result in fines or imprisonment (for up to 2 years). It is important to understand and fulfill your legal responsibilities as a company director in order to avoid any potential disqualification.
Time limit to bring director disqualification proceedings
In 2015, the rules regarding time limits for formal director disqualification proceedings underwent a significant change. Prior to this, the Secretary of State had a two-year window from the date of insolvency to bring director disqualification proceedings against unfit directors of insolvent companies. However, under the updated rules, the Secretary of State now has three years from the date of insolvency to initiate these proceedings. If the director disqualification time limit has passed, the Secretary of State is no longer able to commence formal legal proceedings.
In a 2019 case (Secretary of State for Business Energy and Industrial Strategy v Rajinder Singh Bains), a judge ruled that, even when proceedings are being brought under the new regime, the limitation period on director misconduct is a standalone issue. This means that the Secretary of State can rely on conduct that occurred before October 2015, as long as proceedings are issued within three years of insolvency.
Read more: On what grounds can a director be disqualified?
Conclusion
After receiving a D Report, the Insolvency Service will investigate the director’s conduct to determine if disqualification action is warranted in the public interest. If the secretary of state decides to move forward with disqualification action, the director must be given at least 10 days’ notice, although it is common for a longer notice period to be provided. It is important to note that director disqualification time limit must be initiated within 3 years of the company’s insolvency.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.