Application of the company directors disqualification act 1986
Author | Elspeth Berry/Rebecca Parry |
Pages | 563-586 |
Chapter 10
Application of the Company Directors Disqualification Act 1986
The system of company director disqualification under the CDDA has, as its primary aim, the protection of the public and, in particular, potential creditors.
It has generally been regarded as being aimed at those who abuse the privilege of trading with limited liability.
LJ: ‘The whole purpose of the 1986 Act is to protect the public from the future activities of those who for the prescribed reasons have shown themselves unfit to act as directors of a company’. See also Re Blackspur Group plc [1998] 1 BCLC 677 at 681, [1998] 1 WLR 422 at 426F per Lord Woolf MR; and R v Seager (Mornington Stafford) [2009] EWCA Crim 1303. A further aim is the encouragement of higher standards among directors: Re Grayan Building Services Ltd [1995] Ch 241 at 253G and 257–8. For a detailed discussion of the director disqualification regime, see A Mithani (ed), Mithani: Directors’ Disqualification (LexisNexis, looseleaf).
899; Re Grayan Building Services Ltd [1995] Ch 241 at 257; Secretary of State for Trade and Industry v Walker [2003] EWHC 175 (Ch), [2003] 1 BCLC 363.
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of assets, the misuse of customer deposits, or taking deposits at a time when there was no reasonable prospect of supplying the goods or services requested. Accordingly, in cases where an insolvent partnership is wound up as an unregistered company under Part V of the IA 1986 (see 6.4), proceedings may be brought against a person who is, or who has been, an officer of the partnership and whose conduct as an officer of the partnership, makes him unfit to be concerned in the management of a company. The proceedings may be based on the officer’s conduct in relationship to that partnership alone
A disqualification regime also applies to LLPs (see 10.3), and there are strong parallels between this regime and that which applies to companies.
10.1 GENERAL PARTNERSHIPS
Provisions of the CDDA are applied with appropriate modification to general partnerships by article 16 of the IPO. Limited partnerships are discussed separately at 10.2. Unfortunately, the legislation that deals with the disqualification of partners suffers from the complexity that is typical of legislation in the area of insolvent partnerships and it is occasionally
ambiguous or anomalous,
10.1.1 Application of the Company Directors Disqualification Act 1986 by the Insolvent Partnerships Order 1994
It is necessary, when considering the potential disqualification of partners, to read the IPO alongside the CDDA, since the IPO applies a modified version of the CDDA.
which are applied by article 18 of, and Schedule 10 to, the IPO.
The relevant provisions of the CDDA apply where a partnership is ‘wound up as an unregistered company under Part V’ of the IA 1986,
It appears relatively clear that the CDDA provisions do not apply to solvent partnerships, nor to partnerships which are being informally wound up, outside the framework of Part V of the IA 1986. The regime does not appear to apply where the individual partners jointly present a petition under article 11 of the
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IPO in their capacities as members of the partnership for their own bankruptcies and the winding up of the partnership.
10.10). However, this is likely to result in a disqualification of a relatively short duration compared with the 2–15-year period of a disqualification on grounds of unfitness (see 10.4).
The IPO applies several provisions of the CDDA to insolvent partnerships, with appropriate modification: sections 1 (disqualification orders, general), 1A (disqualification undertakings, general), 6–10 (unfitness, disqualification for competition infringements, disqualification for fraudulent or wrongful trading), 13–15 (consequences of contravention), 17 (application for permission to act in spite of the disqualification), 19(c) (exclusion of liquidations prior to 28 April 1986) and 20 (admissibility in evidence of statements), and Schedule 1 (matters for determining unfitness). The IPO includes, in Schedule 8, a revised text of some of these provisions (sections 6, 7, 8, 9, 13, 14, 15, 17 of, and Schedule 1 to, the CDDA), whereas in other instances (sections 1, 1A, 10, 19(c) and 20) the sections must be read with appropriate revisions, as discussed in the next paragraph.
10.1.2 Interpretation
When reading the CDDA and the IA 1986 provisions which are applied to...
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