A disqualified person must not act as a company director, or be concerned directly or indirectly in the promotion, formation or management of a company, without the court’s permission, for the period of the ban. Bans come from a court order or a voluntary disqualification undertaking under the Company Directors Disqualification Act 1986, last up to 15 years, and for an unfit director of an insolvent or dissolved company last at least 2 years. Breaching a ban is a criminal offence and makes the person personally liable for company debts.

What does a disqualification stop someone doing?

Under section 1(1) of the Company Directors Disqualification Act 1986 (CDDA), a disqualification order means the person must not be a director, act as receiver of a company’s property, or in any way take part in the promotion, formation or management of a company unless the court gives leave, and must not act as an insolvency practitioner. A disqualification undertaking under section 1A has the same content.

The Insolvency Service’s guidance on the effect of a disqualification makes the boundaries practical:

  • Taking a job with a company is not barred, but “management” is wide and can include ordering from or negotiating with suppliers, hiring staff, dealing with the bank account or acting as a management consultant.
  • Being a company secretary is not automatically barred, but the duties actually performed may amount to management.
  • Trading as a sole trader or in a partnership is allowed; being involved in managing a limited liability partnership is not.
  • Holding shares is allowed, but giving directions to the board as a shareholder carries risk.

Other rules also bite. The guidance lists charity trusteeship, school governance, occupational pension scheme trusteeship (which needs leave from the Pensions Regulator) and membership of professional bodies for solicitors, barristers and accountants. Separately, section 167M of the Companies Act 2006 makes it an offence to act as a director without verified identity; see Companies House identity verification.

On what grounds can a director be disqualified?

Ground CDDA section Maximum (minimum)
Conviction of an indictable offence connected with a company 2 15 years; 5 if ordered by a court of summary jurisdiction
Persistent breaches of filing and related requirements 3 5 years
Fraud or breach of duty found in a winding up 4 15 years
Summary conviction with three relevant findings in 5 years 5 5 years
Unfit conduct as director of an insolvent company, or one dissolved without becoming insolvent 6 (mandatory) 15 years (2)
Unfitness found after an investigation, in the public interest 8 15 years
Director of a promoter of tax avoidance schemes, on an HMRC application 8ZG 15 years
Competition law breach plus unfitness 9A (mandatory) 15 years
Liability for fraudulent or wrongful trading 10 15 years

Section 3 is relevant to small companies that fall behind with Companies House. Persistent default can be proved conclusively by showing three or more defaults in the 5 years ending with the application, and the relevant provisions now include acting as a director without verified identity under sections 167M and 167N of the Companies Act 2006. Late accounts are covered in Companies House deadlines and penalties.

How is unfit conduct judged?

Most cases follow an insolvency. Section 7A requires the liquidator, administrator or administrative receiver to send the Secretary of State a conduct report on everyone who was a director on the insolvency date or in the 3 years before it, normally within 3 months of the insolvency date. The Insolvency Service then decides whether investigating further is in the public interest. An application under section 6 must be made within 3 years of the company becoming insolvent or being dissolved, unless the court allows a later one (section 7(2)).

Section 12C and Schedule 1 list what the court, the Secretary of State or HMRC must consider: how far the person was responsible for material breaches of legal requirements and for the insolvency, how often it happened, the loss or harm caused or risked, and, for directors, any misfeasance, breach of fiduciary duty or material breach of their obligations as a director. GOV.UK gives examples of unfit conduct including trading on when the company cannot pay its debts, not keeping proper accounting records, not filing accounts and returns, not paying tax owed by the company and using company money or assets personally. Directors’ conduct can be measured against the duties in the Companies Act, and continuing to trade while insolvent is covered in wrongful trading and director liability.

What is a disqualification undertaking?

An undertaking is the out of court alternative. Where the Secretary of State is satisfied that the section 6 conditions are met, section 7(2A) allows an undertaking to be accepted if that is expedient in the public interest instead of applying, or continuing to apply, for an order. Section 1A(2) sets a maximum of 15 years and, for undertakings under section 7, a minimum of 2 years. HMRC officers can accept undertakings in the tax avoidance promoter cases under sections 8ZF and 8ZG.

The Insolvency Service guidance says an accepted undertaking has the same effect as a court order and can only be amended by the court. If it is accepted before proceedings start, the Insolvency Service does not recover its investigation costs from the director. If it comes after proceedings have begun, the director may have to pay costs up to that date. Where a person is subject to more than one order or undertaking, the periods run concurrently (sections 1(3) and 1A(3)). Unless the court orders otherwise, a disqualification order starts at the end of 21 days beginning with the date of the order (section 1(2)).

What happens if someone breaches a ban?

  • Criminal liability: under section 13, acting in breach of an order or undertaking is punishable on indictment by up to 2 years’ imprisonment or a fine, or both, and on summary conviction by up to 6 months or a fine. The Insolvency Service notes a further period of disqualification can follow.
  • Personal liability for debts: under section 15, a person involved in the management of a company in breach of a ban is personally responsible, jointly and severally with the company, for debts incurred while they were involved.
  • Liability for those who take instructions: anyone involved in management who acts on instructions given without the court’s leave by someone they know to be disqualified, or an undischarged bankrupt, is also personally liable for debts incurred while acting on those instructions. Having once acted on such instructions, they are presumed willing to act on later ones unless they show otherwise (section 15(5)).

Separately, section 15A allows the Secretary of State to seek a compensation order against a disqualified director whose conduct caused loss to creditors of an insolvent company, or one dissolved without becoming insolvent. The application must be made within 2 years of the order or undertaking. Under section 15B the amount can benefit named creditors or classes of creditor, or be paid into the company’s assets.

Can a disqualified person get permission to act?

Yes, but only from the court. Section 17 sets out which court hears the application for leave, and the Secretary of State, or HMRC in its own cases, appears to draw the court’s attention to anything relevant. Without it, the ban applies to all companies registered in England, Wales and Scotland, to foreign companies with a sufficient connection, and in Northern Ireland. The disqualification is entered on the Companies House register of disqualified directors.

What does a typical case look like?

Illustration only. Cedar Ltd enters creditors’ voluntary liquidation owing HMRC two years of PAYE and VAT. Its director, Pat, had not filed the last two sets of accounts and had kept paying himself throughout. The liquidator’s conduct report goes to the Insolvency Service, which writes to Pat setting out its concerns. Pat accepts the facts and offers an undertaking of 6 years before any court proceedings are issued, so no investigation costs are recovered from him. He must resign his other directorship, may work as an employee but not in management, and must apply to court if he later wants to run a company. The Secretary of State could also seek a compensation order within 2 years if creditors lost out because of his conduct.

What should accountants and advisers watch for?

  • Check the register of disqualified directors before taking on a company client or accepting instructions from a new director.
  • Do not take day to day instructions from a client who is disqualified; section 15 liability attaches to people who act on them.
  • Remember that a title such as “consultant” or “adviser” does not avoid the ban if the person is in fact managing the business.
  • Keep records showing the advice given to directors of struggling companies, including on tax arrears and Time to Pay.

Company directors can protect the business against the cost of an HMRC check with tax investigation insurance, which pays up to £100,000 of accountant’s fees with Solar Protect. Read how our cover works or get a quote.

Related Accountapedia entries

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.