Company directors disqualification – the hidden penalty on sentence
Our clients will turn their mind to what punishment they might receive if they plead guilty to, or are convicted of, a criminal offence. In most cases the thought is whether it might be a prison sentence, a community penalty, or a hefty fine and perhaps not a directors disqualification.
While the substantive penalty is, of course, important, on occasion there are other things more serious to consider. In previous articles, we have looked at issues such as confiscation, and in this article, we consider a company directors disqualification.
What do business people need to consider?
The Company Directors Disqualification Act 1986 provides that a court may make a disqualification order where a person is convicted of an offence which is concerned with the mismanagement of a company.
There are a wide number of scenarios catered for under the Act. As a result the actual circumstances must be considered with care. In certain situations, offences committed abroad will also qualify, as set out in section 5A of the Act.
What conduct is relevant?
Both the internal and external management of the company are relevant to section 2(1) of the 1986 Act (Corbin (1984) 6 Cr App R (S) 17). A director’s general conduct in running the affairs of the business is also relevant (Georgiou (1988) 10 Cr App R (S) 137).
The court has extensive discretion in relation to most offences:
‘This is a completely general and unfettered power given by Parliament to courts on the occasion when a person is convicted of an indictable offence of that type. Parliament has decided not to give the sentencing court any guidance as to the way in which it ought to exercise its powers of disqualification in the very many and varied circumstances in which it may come to exercise those powers” (Young (1990) 12 Cr App R (S) 262).
What is a ‘disqualification order’?
The effect of the order is to prevent a person being involved in the future affairs of [any] company:
- he shall not be a director of a company, act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court, and
- he shall not act as an insolvency practitioner.
How long does the order last?
An order made by a Magistrates’ Court can be for no longer than five years. An order made by the Crown Court must be no longer than fifteen years, although in relation to some offences there is a shorter time frame specified.
The Court of Appeal has on occasion supported the making of lengthy orders, for example, one lasting eight years in R v Singh-Mann and Others [2014] EWCA Crim 717.
Will a guilty plea make any difference as to the length of the order?
A guilty plea will not act to reduce the disqualification period. This is because the discount for an early plea does not apply to ancillary orders (Clayton [2017] EWCA Crim 49, [2017] All ER (D) 71 (Jan)).
It is, however, inappropriate to order disqualification where the offender is conditionally discharged (Young (1990) 12 Cr App R (S) 262).
It may be inappropriate for a court to order compensation to be paid by a director who, by virtue of the making of this type of order, will be deprived of the ability to earn a living (Holmes (1992) 13 Cr App R (S) 29).
What happens if I breach the order?
Imprisonment of up to 2 years may be imposed if an order relating to a directors disqualification is breached.
How we can assist in a directors disqualification case
We are experts in all aspects of criminal law. As a result we are well placed to advise you if the above provisions relating to a directors disqualification might be invoked in your case. If you have any concerns or simply to discuss any aspect of your case, then please contact your nearest office here.
Alternatively you can use the contact form below.
