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Disqualification of Directors: UK
08/09/2014

In our news bulletin of 20th June 2014 we reported on a proposal being considered by the UK Government to extend the scope of the current law on who may qualify to be a director of a UK company. The proposal concerned the factors to be taken into account by the UK courts when considering whether an individual’s conduct had been such that he was unfit to act as a director and should be disqualified from managing a company.

The Department for Business Innovation and Skills (‘BIS’) was tasked to conduct a consultation process on the principal proposals, including whether a finding in a foreign jurisdiction against a director of misconduct in the management of an offshore company can be taken into account in disqualification proceedings in the UK.
Following the conclusion of the consultation process, the BIS announced that it is the Government’s intention to seek to amend the Company Directors Disqualification Act 1986 to:

- Permit UK courts to take into account a directors misconduct in a foreign jurisdiction when considering an application to disqualify a director in the UK; and

- Extend the Secretary of State’s power to disqualify an individual from acting as a director of a UK company, if that individual has been convicted of a criminal offence abroad in connection with the promotion, formation or management of a company. The Secretary of State already has this power for individuals convicted of these offences in the UK and the proposal extends the existing power to foreign convictions.

The BIS is actively considering amending the disqualification provisions under Part 40 of the Companies Act 2006, Part 40 relates to disqualification in foreign jurisdictions. The proposed amendment would provide that a director who is subject to restrictions abroad would also face restrictions from acting as a director in the UK. We understand that enquiry is being conducted into how other jurisdictions deal with this issue.

The proposed changes are of particular importance to company directors who need to remain abreast of local laws or obtain local advice to avoid an inadvertent breach of local laws and regulations which can have serious repercussions in the UK and possibly elsewhere.