Can I Be Disqualified as a Company Director After a Criminal Conviction?

Can a Criminal Conviction Lead to Director Disqualification?

The Company Directors Disqualification Act 1986 sets out when a person can be banned from acting as a company director and the consequences of breaching that ban.

Not every criminal offence leads to director disqualification. For conviction-based disqualification, the connection between the offence and the company’s activities is important. 

For example, fraud involving company funds or falsifying business records may lead to disqualification. An offence unrelated to your role as a director is less likely to fall within these provisions, although other professional or regulatory restrictions may apply.

A conviction does not, by itself, impose a disqualification order. The relevant legal process must take place before a ban applies.

Indictable offences

The Company Directors Disqualification Act 1986 allows a court to disqualify someone convicted of an indictable offence connected with the formation, management, liquidation or other specified activities of a company. 

An indictable offence includes offences that can be tried in the Crown Court, even where the particular case is dealt with in the Magistrates’ Court. Where the legal requirements are met, a court can impose disqualification as part of the criminal proceedings.

The court considers the circumstances of the offence and whether disqualification is appropriate.

Summary offences

The Act also deals with certain summary offences involving failures to meet company filing or notification requirements.

This may include repeated failures to submit required documents or notify Companies House of relevant information.

A single summary conviction is not enough for disqualification under this route.

Does Director Disqualification Happen Automatically?

A criminal conviction does not automatically result in director disqualification under the usual conviction-based provisions. A court must make a disqualification order, or a formal disqualification undertaking must be accepted, before a ban takes effect.

Until then, you may generally continue acting as a director, provided no other legal restriction applies.

For example, a director convicted of an offence connected with the business may remain legally able to manage the company if no disqualification order has been made. However, separate regulatory restrictions may still affect their position.

Directors should establish whether disqualification was ordered at sentencing or whether the Insolvency Service has started separate proceedings.

Some industries also have their own rules. Financial services, for instance, are subject to regulatory requirements concerning whether individuals are suitable to perform particular roles.

Obtaining legal advice early can help you understand which restrictions apply and whether further action is likely.

Criminal Court Orders and Separate Disqualification Proceedings

There are two distinct procedural paths through which a director can be disqualified following a criminal conviction, and they can operate independently of each other.

The first path is a disqualification order made by the criminal court at the point of sentencing.

Where the conviction is for a qualifying indictable offence, the Crown Court can impose director disqualification as part of the same criminal proceeding, without any separate application being needed.

The second path is civil disqualification proceedings brought separately by the Secretary of State, acting through the Insolvency Service. These proceedings are civil in nature and follow their own procedure. 

These proceedings can arise from misconduct identified during an investigation into a company or its directors. They may follow a criminal conviction but do not depend on one in every case.

A director may also be offered a disqualification undertaking, which avoids a contested hearing but carries the same legal restrictions as a court order.

How civil proceedings differ from criminal sentencing

Civil disqualification proceedings have a different purpose from criminal sentencing. The question in civil proceedings is whether your conduct as a director justifies a ban to protect the public and creditors.

Criminal penalties such as custody do not arise in civil disqualification proceedings themselves. If you breach the terms of a disqualification order or undertaking, that breach is a separate criminal offence and can lead to imprisonment. 

The civil proceedings are concerned only with whether a ban should be imposed and for how long.

Disqualification undertakings

A disqualification undertaking is a formal written agreement between you and the Secretary of State. It has the same legal effect as a court order and is recorded on the public register of disqualified directors held by Companies House.

Entering into an undertaking avoids a court hearing, but it is a serious legal commitment. 

The period of director disqualification and any agreed schedule of conduct are fixed at the point of signing. Once signed, the terms are not easily changed. 

Negotiating the period, the scope of the agreed conduct and any factual inaccuracies before signing requires legal advice. A director who signs an undertaking without representation may accept a longer ban or broader restrictions than the evidence warrants.

What Can Affect the Length of Director Disqualification?

The length of director disqualification depends on the legal grounds and seriousness of the conduct.

For conviction-based disqualification under section 2, the maximum is 15 years in the Crown Court or five years in the Magistrates’ Court.

Disqualification following qualifying summary filing offences under section 5 can last up to five years. Other disqualification routes have their own statutory requirements and periods.

The court considers factors such as the seriousness of the misconduct, the director’s involvement, any harm caused and whether the conduct was isolated or repeated.

For example, deliberate misuse of company funds over several years may justify a longer period than an isolated breach involving less serious conduct. Cooperation with investigators and steps taken to address the consequences may also be relevant.

Where a disqualification undertaking is proposed, the period may be discussed before the agreement is accepted. However, no guarantee that agreeing to an undertaking will result in a shorter ban.

The date a disqualification begins also matters. Court orders generally take effect after the statutory commencement period unless the court directs otherwise. Undertakings are subject to their own commencement rules.

Where more than one order or undertaking exists, specific rules govern how the periods overlap. A solicitor can confirm the dates and restrictions that apply.

What Does Director Disqualification Mean for Your Business?

A director disqualification order or undertaking has immediate and wide-ranging consequences for your business and personal position. The restrictions extend well beyond the formal title of director.

From the date the order or undertaking takes effect, you must resign from all directorships. You are also prohibited from being involved in the promotion, formation or management of any company, directly or indirectly. 

Continuing to give instructions to employees, making decisions about company finances, or negotiating contracts on behalf of a company while disqualified can all constitute a breach.

Personal liability for company debts may arise if you continue to act in a management capacity while disqualified. Third parties who act on your instructions during the period of disqualification may also face personal liability. 

This risk extends to family members, colleagues or employees who carry out your instructions without understanding that you are subject to a disqualification order.

Business continuity planning should begin as soon as director disqualification becomes a realistic prospect. 

Existing contracts, governance arrangements, banking authorities and decision-making structures all need to be reviewed and, where necessary, restructured so that legitimate and qualified individuals can take over responsibilities.

Using another person as a nominal director to maintain your control over a company while you are disqualified is not a lawful solution. 

Resigning from existing directorships

You must notify Companies House of your resignation from each directorship. The timing matters: the resignation should take effect on or before the date the disqualification order or undertaking comes into force. 

Failing to resign promptly risks a period of technically acting as a director while disqualified, even if that was not your intention. A solicitor can advise on the correct steps and relevant deadlines to avoid inadvertent breach.

Consequences of acting while disqualified

Acting as a director while subject to a director disqualification order or undertaking is a criminal offence under the Company Directors Disqualification Act 1986. 

On conviction, it can result in imprisonment of up to two years, a fine, or both. Personal liability for all debts incurred by the company during the period you acted while disqualified can also be imposed. 

These consequences apply whether or not you intended to act unlawfully, so the full scope of what is prohibited must be clearly understood from the outset.

Can You Obtain Permission to Act as a Director?

A disqualified director can apply to the court for permission to act as a director of a specific named company despite being subject to a disqualification order or undertaking. This is commonly referred to as leave to act, or permission to act. 

The court considers several factors when deciding whether to grant permission. These include the reasons for the original disqualification, the nature of the role you would perform in the company and the safeguards that would be in place to protect creditors and the public.

Conditions are often attached. The court may permit you to act only in a defined capacity, with specific reporting requirements, professional oversight or restrictions on particular activities. 

Permission applies only to the named company specified in the application. If you need to act in more than one company, a separate application is required for each. 

The process requires careful preparation: an application that does not address the court’s concerns directly is unlikely to succeed, and an unsuccessful application may affect how any future application is received.

For example, where the disqualified person’s involvement in a particular company is essential to its operation and appropriate safeguards exist. 

How a Business Crime Solicitor Can Help With Director Disqualification

A business crime solicitor can advise on the risk of disqualification following a criminal conviction and the options available at each stage.

If prosecution is ongoing, they can assess whether the alleged offence is connected to company activities and whether disqualification may be considered at sentencing.

They may also make representations about the circumstances of the offence and whether a disqualification order is appropriate.

Where the Insolvency Service starts separate proceedings, a solicitor can review the evidence, identify possible grounds of defence and advise on responding to the allegations.

If a disqualification undertaking is offered, they can examine its terms and help address disputed facts before you sign.

For directors already disqualified, legal advice may focus on complying with the restrictions or applying for permission to act in a particular company.

A solicitor can also advise on restructuring business arrangements so that the company can continue operating lawfully.

Speak to our Business Crime and Regulatory solicitors for advice about your position and the options available.