Company Directors Disqualification Act 1986

The Company Directors Disqualification Act 1986 (1986 c. 46) forms part of UK company law and sets out the procedures for company directors to be disqualified in certain cases of misconduct.
History.
Lord Millett, in the opinion he gave in , summarized the history of disqualification orders in British company law, noting that they were originally created under s. 75 of the "Companies Act 1928" (subsequently consolidated as s. 275 of the "Companies Act 1929"), which was enacted on the recommendation of the "Report of the Company Law Amendment Committee" (1925-1926) under the chairmanship of Mr Wilfred Greene KC (Cmd 2657). It gave the official receiver, the liquidator or any creditor or contributary the ability to apply to the court having jurisdiction to wind up the company, for an order to disqualify a director from being concerned in the management of a company for a period up to five years. Such order was up to the discretion of the court.
The scope of that provision was subsequently expanded as follows:
The CDDA consolidated the law relating to disqualification orders and introduced the concept of mandatory disqualification, following up on Sir Kenneth Cork's recommendations in the "Insolvency Law and Practice, Report of the Review Committee" (1982) (Cmnd 8558). That report recommended that application for a mandatory order should be made by the liquidator or, with the leave of the court, by a creditor. This was not acceptable to Parliament, which understandably considered that greater safeguards are necessary in the case of a mandatory order than are required where the court retains a discretion to decline to make an order.
Disqualification orders and undertakings.
A court may, and under section 6 shall, make against a person a disqualification order, for a period specified in the order, providing that:
The Secretary of State may also accept disqualification undertakings from such persons in specified circumstances, which will have similar effect.(s.1A)
Disqualification at the discretion of the court.
The court may make a disqualification order where:
The maximum period of the order is 15 years under ss, 2 and 4, and 5 years under ss. 3 and 5.
The court may also make an order for a period of up to 15 years where a person has participated in wrongful trading.(s. 10)
Mandatory disqualification.
By order of the court.
The court shall make a disqualification order against a person in any case where it is satisfied—
A "director" is deemed to include a "shadow director", which is defined as a person in accordance with whose directions or instructions the directors of the company are accustomed to act (but so that a person is not deemed a shadow director by reason only that the directors act on advice given by him in a professional capacity).(s. 9(2) and s. 22(5))
The maximum period for such and order is 15 years, and the minimum period is 2 years.(s. 6(4))
A company becomes insolvent if—
and references to a person’s conduct as a director of any company or companies include, where that company or any of those companies has become insolvent, that person’s conduct in relation to any matter connected with or arising out of the insolvency of that company.(s. 6(3))
Standard for assessing unfitness.
The following factors must be considered in determining whether a director is unfit (s. 9 and Schedule 1):
"In all cases"
"Where the company has become insolvent"
Assessment is considered to be an objective standard in determining what is ordinarily expected of people fit to be directors of companies. Directors must inform themselves of company affairs and join in with other directors to supervise those affairs. The courts have identified relevant factors for determining the length of the disqualification period:
The courts have also provided guidance as to what constitutes an appropriate length for a disqualification period:
Automatic disqualification.
The following persons are automatically disqualified:
Subsequent amendments.
"Enterprise Act 2002".
Effective 20 June 2003, the "Enterprise Act 2002" added ss. 9A - 9E to the Act, which expand the mandatory disqualification régime to cover the following breaches of competition law under the "Competition Act 1998" or the Treaty establishing the European Community:
The factors for determining unfitness in this case relate solely to behaviour concerning the breach of competition law, and the other factors listed in Schedule 1 do not apply. Disqualification may be made through an order of the court or through an undertaking.
"Small Business, Enterprise and Employment Act 2015".
In March 2015, the "Small Business, Enterprise and Employment Act 2015" received Royal Assent. On 1 October 2015, Part 9 of the 2015 Act came into force, which amended the 1986 Act to introduce:
Consequences.
Other effects.
A person subject to a disqualification order or undertaking will also be disqualified from acting as:
Membership in certain professional bodies may also be affected, and members may be required to notify the fact of such disqualification to the body in question.