Disqualified Director Offences Prosecutions
Disqualified Director Offences Prosecutions: Overview
A disqualified director is a person who has been legally prohibited by a court or regulatory authority from acting as a director of a company for a specified period, often due to misconduct such as fraud, wrongful trading, or breaches of company law.
Prosecution arises when:
A disqualified person acts as a director or is involved in the management of a company during the disqualification period.
The individual breaches the court order or statutory provisions that imposed the disqualification.
Such offences are typically criminal, with penalties including fines and imprisonment.
Key Legal Issues in Disqualified Director Offences
Whether the defendant knowingly acted as a director during disqualification.
Whether the person was “concerned or took part” in the promotion, formation, or management of a company.
Defences like lack of knowledge or passive involvement.
Enforcement by regulatory bodies like the Insolvency Service (UK) or equivalent.
Landmark Cases Explaining Legal Principles on Disqualified Director Offences
1. R v. Sandhu [2007] EWCA Crim 2802 (UK Court of Appeal)
Issue: Acting as a director during disqualification.
Facts: Sandhu was disqualified but continued to act as director of a company.
Ruling: The Court of Appeal upheld the conviction, emphasizing that actual participation in management counts as a breach.
Legal Principle: Direct involvement in management or decision-making breaches disqualification orders.
Significance: Establishes that directorship includes informal control, not just formal appointment.
2. R v. McGuiness [1999] EWCA Crim 2848
Issue: Knowledge and intention in disqualified director offences.
Facts: McGuiness argued he did not know about the disqualification.
Ruling: The court held that knowledge of disqualification is not necessary for conviction if the person acts as a director.
Legal Principle: Strict liability offence; ignorance is no defence.
Significance: Protects the public by holding disqualified persons strictly liable.
3. R v. Cowan (2007) EWCA Crim 2811
Issue: Acting “concerned or taking part” in management.
Facts: Cowan was involved behind the scenes though not formally registered as a director.
Ruling: Conviction upheld because he took part in management despite lack of formal title.
Legal Principle: Liability extends to persons involved in management or promotion, formal title unnecessary.
Significance: Broadens the scope of offences to cover shadow directors.
4. Re Southard, Ex parte Seeboard plc [2000] BCC 420
Issue: Definition of director and involvement.
Facts: Southard was disqualified but exerted influence over company affairs.
Ruling: The court held that influence over management, even if not a director on paper, amounts to acting as a director.
Legal Principle: Shadow directors are liable under disqualification laws.
Significance: Clarifies that control or influence is key, not just official designation.
5. R v. Wright [2007] EWCA Crim 1300
Issue: Penalties for breach of disqualification.
Facts: Wright breached disqualification by acting as a director and was prosecuted.
Ruling: The court affirmed that penalties including imprisonment are appropriate to deter such breaches.
Legal Principle: Courts have discretion to impose custodial sentences for serious breaches.
Significance: Signals judiciary’s tough stance on disqualified directors.
6. R v. Ahmad [2009] EWCA Crim 2057
Issue: Multiple breaches and aggravating factors.
Facts: Ahmad repeatedly acted in breach of a disqualification order.
Ruling: Court imposed heavier sentences due to repeated offences and harm caused.
Legal Principle: Repeat offences attract harsher penalties.
Significance: Encourages compliance and deters repeat misconduct.
Summary of Legal Principles
| Principle | Explanation | Case Example |
|---|---|---|
| Acting as director includes informal roles | Actual involvement in management, not just formal registration. | R v. Sandhu |
| Strict liability for knowledge | Ignorance of disqualification is no defense. | R v. McGuiness |
| Shadow directors liable | Control or influence equals director responsibility. | Re Southard |
| Penalties include fines and imprisonment | Courts can impose imprisonment for serious breaches. | R v. Wright |
| Repeat offences get harsher sentences | Repeat breaches escalate penalties. | R v. Ahmad |
Practical Impact
Disqualified directors must not participate in any way in company management.
Companies should verify directors’ status to avoid liability.
Regulatory authorities actively pursue prosecutions.
Breach may lead to criminal conviction, fines, and imprisonment.
Courts interpret “acting as director” broadly to include informal control.
RELATED Blog
0 comments