All sorts of grounds can lead to director disqualification.
Non-payment of debt to HMRC; wrongful and fraudulent trading in insolvency;
failure to comply with company legislation; unfit conduct and criminal
conviction are some of them.
Directors are disqualified under the Companies Act 1990.
Disqualification orders can apply for up to 15 years, and are issued with a
range of restrictions.
Disqualified Director Restrictions
Disqualified directors are not permitted to act as trustees;
they cannot sit on the board of a charity, police authority or school; neither
are they allowed to act as a registered social landlord. They cannot sit on a
health board or social care body and they are banned from practising as an
accountant, solicitor or barrister.
In addition, a director disqualification order will also
prevent those disqualified from acting as a director of any UK registered
company or any overseas company with links to the UK. It is also not allowed to
form, run or market a company. Any breach of the terms of the disqualification
order could lead to a custodial sentence of up to two years.
Despite all of this, disqualified directors are actually not
banned from owning shares. Anyone disqualified as a director is still permitted
to purchase shares in public companies and can also hold shares in UK
registered private limited companies.
A Grey Area of Law
This may of course appear confusing, because as we said, disqualified
directors are forbidden from forming, running or marketing a company. So how
does this work?
The law states that disqualified directors cannot be
directors of UK companies. They can’t form a company, but they are allowed to
hold shares. In other words, they can part-own a company with other
non-disqualified directors, providing those non-disqualified directors are
responsible for marketing and running it.
It is a bit of a grey area of law, but for the present time
the answer to our original question is yes, a disqualified director can be a
shareholder.
If you have been disqualified as a director and are unclear
on your rights, the best thing to do to ensure you do not breach the terms of
your disqualification order is to take professional advice.
