The law
We fulfil a range of statutory functions and exercise powers and duties on behalf of the Secretary of State from the Insolvency Acts 1986 and 2000, the Company Directors Disqualification Act 1986 and the Companies Acts 1985 and 2006 as well as from a range of secondary legislation relating to these acts. To access the legislation please visit www.legislation.gov.uk.
The Company Directors Disqualification Act 1986 (CDDA) seeks to maintain the integrity of the business environment.Those who become directors of limited companies should:
- Carry out their duties responsibly; and
- Exercise adequate skill and care with proper regard to the interests of the company’s creditors and employees.
The majority of directors do this effectively, but the CDDA is a powerful tool against those who abuse the privilege of limited liability.
The Act applies to not just those formally appointed as directors, but also to those who carry out the functions of directors.
The court can make disqualification orders in relation to:
- Certain criminal offences associated with the Companies Act legislation;
- Wrongful trading – such as trading whilst insolvent;
- Failure to comply with requirements under the Companies Act legislation;
- Unfit conduct in insolvent companies.
It is a criminal offence to breach a disqualification order or undertaking without permission of the court and penalties range from a fine, to up to two years in prison.
Any breach renders the individual personally liable for the company's debts incurred during the breach. The company’s officers and managers can also be punished as if the order applied to them personally.
