The Corporate Enforcement Authority (“CEA”) have published an Information Note on the circumstances leading to the Disqualification of Directors under the Companies Act 2014 and the associated consequences.
The Information Note provides guidance on the purpose and effects of disqualification, and on the various ways in which a person can be disqualified from acting as a company director. The Information Note also provides guidance on the consequences of breaching a disqualification, which include criminal prosecution, further disqualification, and potentially being held personally liable for a company’s debts.
CRO Involuntary Strike Off
The most common way for a director to be disqualified is where they were a director of a company that was involuntarily struck off.
The CRO’s strike off programme is being rolled out on an incremental basis as 2024 progresses and, in the context that being the director of a company that has been struck off is a ground for disqualification, the directors of many such companies will face scrutiny by the Corporate Enforcement Authority (CEA).
The CEA’s examination in this context involves considering the conduct of directors of companies that, at the date of strike off, had undischarged debts. This consideration may lead to enforcement action being taken and, ultimately, may lead to the disqualification of these persons from acting as company directors.
What is disqualification?
In the context of company law, ‘disqualified’ means a person being disqualified from:
- being appointed or acting as a director or other officer, statutory auditor, receiver, liquidator, or examiner,
- being in any way, whether directly or indirectly, concerned or taking part in the promotion, formation, or management of each of the following:
- a company within the meaning of section 819 of the Act,
- any friendly society within the meaning of the Friendly Societies Acts 1896 to 2014,
- any society registered under the Industrial and Provident Societies Acts 1893 to 2014,
There are two primary instances in which the possibility of the disqualification of company directors arises, namely:
- in the context of liquidators’ reporting on the conduct of the directors of insolvent companies under section 682 of the Act, and
- in the context of the CEA, or others, making applications to the High Court under section 842 of the Act.
How to Avoid Disqualification?
Directors are required to act in the best interests of the Company and the Corporate Enforcement will consider the activities of the directors and whether they acted in the best interests of the Company and did their actions lead to the Company being struck off or become insolvent.
- If the company is facing insolvency the directors should consider the Early Warning Tools Guidance for Directors and if necessary, place the company into liquidation or examinership.
- If a Company has received an involuntary strike off notice it should file, the late annual returns and financial statements and pay the late filing fees or consider applying to the District Court for an extension of time to file the late annual returns before the Company is struck off
- If a Company has been struck off involuntarily it may be restored to the Register by way of an Administrative Restoration (within 12 months of strike off) or High Court Restoration
- Co-operate with any requests from a liquidator if the Company has been placed into liquidation or any communications from the Corporate Enforcement Authority
More Information
Restriction and Qualification of Directors
Have you received a 10 week warning letter from the CRO
NB: The content of this article is provided for information purposes only and does not constitute legal or other advice.
Share this on...