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Understanding Director Disqualification
This article looks at the grounds for director disqualification as well as the legal framework that governs these processes and what directors should do if facing disqualification, empowering directors to better navigate their responsibilities and potential challenges.
What is Director Disqualification?
Director disqualification refers to the legal restriction placed upon an individual that prevents them from acting as a director or being involved in the management of a company for a specified period, typically between two to fifteen years. This measur00e is enforced under the Company Directors Disqualification Act 1986, which aims to protect the public and maintain trust in UK corporate governance.
High Profile Disqualification: Ant Middleton
A high-profile case is the former SAS: Who Dares Wins Star Ant Middleton, who was disqualified, along with his wife, in March 2025 for 4 years after his company, Sway & Starting Limited, went into liquidation with more than £1.2 million in unpaid VAT and corporation tax. Middleton and his wife drew nearly £3 million via a director’s loan despite the tax shortfall (being £869,351 in corporation tax and £384,518 in unpaid VAT); this led to liquidation of the company and the director ban meaning that both Mr and Mrs Middleton will be banned from acting as company directors for the disqualification period, and cannot have any involvement in the promotion, formation or management of the company.
This case highlights how tax mismanagement, even if high‑profile cases, can trigger disqualification, and that post‑ban opportunities to act again can depend on repaying debts and securing court permission.
The Covid-Loan Connection
Bounce Back Loans and The Coronavirus Business Interruption Loan Scheme (CBILS) were launched in 2020 to support struggling businesses. However, the schemes attracted significant fraud. As of June 2024, £1.88 billion in loans, of the total drawn value £76.90 billion, have been flagged by lenders as suspected fraud.
Between 2023–24, 831 directors were banned for Covid-loan misconduct, with average bans nearing 10 years.
Grounds for Disqualification
Directors can face disqualification for various reasons including:
- Insolvency-related Issues: Allowing the company to trade while insolvent or failing to take action to minimise losses to creditors.
- Failure to Maintain Proper Records: Poor financial management, including not keeping accurate accounting records and not filing necessary documents with Companies House.
- Fraudulent Activities: Engaging in fraudulent behaviour, misrepresenting financial statements, or using company assets for personal gain.
- Tax Evasion: Consistent failure to meet tax obligations can lead to severe penalties including disqualification.
The Disqualification Procedure
The following steps typically outline the disqualification process:
- Investigation: Upon receiving reports of misconduct, the Insolvency Service conducts a thorough investigation into the director’s actions.
- Application for Disqualification Order: If warranted, an application is made to the court for a disqualification order, which can lead to disqualification periods ranging from 2 to 15 years, depending on the severity of the misconduct, and may also result in a compensation Order being made against the director.
- Court Proceedings: Directors have the right to defend their conduct in court, where evidence will be reviewed to ascertain whether their actions fell below acceptable standards.
What Can Directors Do If Facing Disqualification?
If a director finds themselves under investigation or facing disqualification, taking timely and appropriate action is critical:
- Seek Professional Legal Advice: Engaging with a legal professional can clarify the situation, outline potential consequences, and provide a robust defence strategy.
- Consider a Disqualification Undertaking: In some cases, voluntarily disqualifying oneself can lead to a quicker, less public resolution, limiting the long-term impact on one’s career.
- Prepare a Defence: If contesting disqualification, building a strong defence based on mitigating factors and demonstrating compliance with duties can greatly influence the outcome.
How Bermans can help
When a company enters insolvency, the spotlight often turns to its directors. Bermans insolvency team specialise in acting on behalf of directors facing disqualification proceedings and helping clients secure permission to act as a director following a disqualification order, where appropriate and in the public interest.
If you are a director seeking more information on disqualifications or require legal support, please contact our expert legal team today. We are here to help you ensure compliance and protect your interests.