Guide
Director disqualification - what you need to know
How company directors can be disqualified under the Company Directors Disqualification Act 1986, the grounds for disqualification (sections 2-10), disqualification periods from 2 to 15 years, and the serious consequences of acting while disqualified.
The Company Directors Disqualification Act 1986 (CDDA) gives courts the power to ban individuals from being a company director. If you are disqualified, you cannot be a director, act as a company receiver, or be involved in the promotion, formation or management of any company without court permission.
This guidance explains the grounds for disqualification, how long disqualification can last, and the serious consequences of acting while disqualified.
This applies to all company directors
Disqualification rules apply to all directors of UK-registered companies, including private limited companies and PLCs. They also apply to de facto directors (people acting as directors without formal appointment) and shadow directors (people whose instructions the directors follow).
If you are a sole trader or partner in a general partnership, these rules do not apply directly to you, but you could still be disqualified if you have been a company director in the past.
What disqualification prevents you from doing
A disqualification order or undertaking prevents you from:
- Being a director of any company
- Acting as a receiver of a company's property
- Being directly or indirectly involved in the promotion, formation or management of any company
- Acting as an insolvency practitioner
These restrictions apply to all companies, not just the one where problems occurred. You cannot get around disqualification by having someone else act as the formal director while you run the business in practice - this is still a breach.
Important: You may apply to court for permission to act as a director despite being disqualified (called 'leave to act'), but permission is only granted in limited circumstances and the court may attach conditions.
Grounds for disqualification
The CDDA 1986 provides several grounds for disqualification. Some are triggered by criminal convictions, others by civil proceedings. The most common ground is unfitness as a director of an insolvent company (section 6).
Section 2 - Conviction of an indictable offence
If you are convicted of an indictable offence connected with the promotion, formation, management, liquidation or striking off of a company, a court may disqualify you.
This includes fraud, theft, false accounting, and other serious offences where the crime relates to your role as a director or company officer. The court has discretion - disqualification is not automatic.
Maximum period: 15 years (on indictment) or 5 years (summary conviction)
Section 3 - Persistent breaches of companies legislation
If you persistently fail to file documents with Companies House (accounts, annual returns, notifications), you can be disqualified.
'Persistent' means three or more defaults in the preceding five years, proved by convictions, default orders, or failures to comply with enforcement orders.
This is designed to ensure directors take their filing obligations seriously. Missing deadlines occasionally may lead to fines, but repeated failures can result in disqualification.
Maximum period: 5 years
Section 4 - Fraud in winding up
If you are found guilty of fraudulent trading, or are otherwise guilty of fraud in relation to the company, you can be disqualified during the winding up of a company.
This applies to serious dishonesty discovered when a company is being wound up - for example, hiding assets from creditors or making fraudulent preferential payments.
Maximum period: 15 years
Section 5 - Summary conviction for filing failures
Three or more summary convictions within five years for failing to file documents with Companies House can lead to disqualification.
Maximum period: 5 years
Section 5A - Convictions abroad
If you are convicted abroad of a 'relevant foreign offence' - one that would be an indictable offence connected with company management if committed in the UK - the Secretary of State can apply to have you disqualified.
Maximum period: 15 years
Section 6 - Unfitness (insolvent companies)
This is the most common ground for disqualification. If you were a director of a company that became insolvent, and the court is satisfied your conduct makes you unfit to be concerned in the management of a company, the court must disqualify you.
Unlike other grounds, disqualification under section 6 is mandatory if unfitness is proved. The court's only discretion is the length of the disqualification period.
Since 2021, this also applies to directors of companies that were dissolved without going through a formal insolvency process (added by the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021).
Period: Minimum 2 years, maximum 15 years
Section 8ZA - Instructing an unfit director
If you are found to have exercised influence over a director whose conduct led to their disqualification, you can also be disqualified. This provision (added in 2015) targets 'shadow directors' and others who may have been pulling the strings.
Period: Minimum 2 years, maximum 15 years
Sections 8ZF-8ZG - Promoting defeated tax avoidance schemes
If you promoted a tax avoidance scheme that has been shown to be contrary to law, you face mandatory disqualification. This provision was added by the Finance Act 2024.
Period: Minimum 2 years, maximum 15 years
Section 11 - Undischarged bankruptcy
While you are an undischarged bankrupt (or subject to a bankruptcy restrictions order or debt relief restrictions order), you are automatically prohibited from acting as a director or being involved in company management.
This is not a court order - it is an automatic legal prohibition that applies from the moment of bankruptcy until discharge. Acting in breach is a criminal offence.
How the Insolvency Service investigates directors
When a company enters insolvency (liquidation, administration, or administrative receivership) or is dissolved, the insolvency practitioner or official receiver must submit a conduct report on each director to the Insolvency Service.
The Insolvency Service reviews these reports and investigates cases where director conduct may have contributed to the company's failure or harmed creditors. If the investigation finds evidence of unfitness, the Insolvency Service will either offer the director a disqualification undertaking or apply to court for a disqualification order.
Time limit: The Insolvency Service must apply to court within 3 years of the company becoming insolvent or being dissolved (though this can be extended with court permission).
Disqualification undertakings
Instead of going to court, you may be offered the chance to give a disqualification undertaking - a voluntary agreement to be disqualified for a specified period.
An undertaking has the same legal effect as a court order. You cannot be a director or involved in company management for the agreed period, and breaching an undertaking carries the same criminal penalties as breaching a court order.
Why accept an undertaking?
- Avoids court costs and public hearing
- Faster resolution and certainty of outcome
- Period is often shorter than a contested court order
- Still recorded on the public register
If you do not accept an undertaking, the Insolvency Service will apply to court and you will face the cost and uncertainty of court proceedings.
What makes a director unfit?
Schedule 1 of the CDDA 1986 sets out the matters the court considers when determining unfitness. Courts look at:
- Your responsibility for contraventions - did you cause the company to breach its legal obligations?
- Your responsibility for insolvency - did your conduct contribute to the company becoming insolvent?
- Frequency of misconduct - was this a one-off failure or a pattern of behaviour?
- Harm caused - what was the nature and extent of loss to creditors, employees, customers or others?
- Misfeasance or breach of duty - did you breach your fiduciary or statutory duties as a director?
Examples of conduct that commonly leads to disqualification include failure to keep proper accounting records, failure to file accounts and returns, trading while insolvent at the expense of creditors, paying yourself preferentially over other creditors, and phoenix company behaviour (dissolving a company to avoid debts and starting a new company).
Disqualification periods
The length of disqualification depends on the seriousness of your conduct. Courts apply a bracket system:
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2-5 years (lower bracket)
Relatively minor misconduct or isolated failures. For example, a first-time director who failed to maintain adequate accounting records but did not act dishonestly.
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6-10 years (middle bracket)
Serious misconduct, but with mitigating factors. For example, trading while insolvent for a period but with some attempt to rescue the company.
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11-15 years (upper bracket)
Very serious misconduct, serial offending, or dishonesty. For example, deliberately extracting company assets at the expense of creditors, or repeated disqualification breaches.
The minimum period under section 6 (unfitness) is 2 years - the court has no power to impose a shorter period. The maximum under any ground is 15 years.
Consequences of acting while disqualified
Acting as a director while disqualified is a criminal offence with severe penalties:
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Criminal prosecution
On indictment, up to 2 years imprisonment and an unlimited fine. On summary conviction, up to 6 months imprisonment and a fine up to the statutory maximum.
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Personal liability for company debts
If you are involved in managing a company while disqualified, you become personally and jointly liable for all the company's debts incurred during that period. This also applies to anyone who acts on your instructions knowing you are disqualified.
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Extended disqualification
Acting while disqualified may result in a further, longer disqualification period.
Important: Personal liability for debts applies not just to formal directors but to anyone involved in managing the company. If you continue to run the business in practice while disqualified - for example, by putting a family member as the nominal director - you remain liable, and the family member may also face prosecution for acting on your instructions.
The public register of disqualified directors
All disqualification orders and undertakings are recorded on a public register maintained by Companies House. Anyone can search this register to check whether a person is disqualified before appointing them as a director.
The register shows:
- Name and (where available) address and date of birth
- Reason for disqualification
- Start date and duration
- Whether permission to act has been granted
- Any previous disqualifications
Tip for businesses: Always check the disqualified directors register before appointing someone as a director. Appointing a disqualified person exposes your company to risk, and you could face liability if you knew or should have known they were disqualified.
Applying for permission to act while disqualified
If you are disqualified but need to continue as a director (for example, to protect a family business or wind down affairs), you can apply to court for 'leave to act' under section 17.
The court will consider:
- The nature and seriousness of your original misconduct
- Your proposed role in the company
- What safeguards are in place (for example, independent monitoring, restrictions on your powers)
- Whether third parties (creditors, employees, customers) are adequately protected
- Any change in circumstances since disqualification
The Secretary of State (through the Insolvency Service) has the right to appear and oppose your application. Permission is not granted automatically - you must demonstrate genuine need and adequate protections.
If permission is granted, it will be recorded on the public register alongside your disqualification.
Compensation orders
Since 2021, the Secretary of State can also apply for a compensation order against a disqualified director. If your conduct caused loss to creditors, you may be ordered to pay compensation.
The application must be made within 2 years of the disqualification order or undertaking. Alternatively, you may be offered the chance to give a compensation undertaking.
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Understand your statutory duties
Many disqualifications result from failure to keep proper records, file on time, or consider creditor interests when the company is in difficulty. See our guide on director duties.
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Seek advice early if the company is struggling
If your company is insolvent or approaching insolvency, get professional advice immediately. Continuing to trade without proper advice can lead to personal liability and disqualification.
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Cooperate with the insolvency practitioner
If your company enters insolvency, cooperate fully with the insolvency practitioner. Failure to cooperate is itself evidence of unfitness.
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Consider an undertaking carefully
If offered a disqualification undertaking, take legal advice. An undertaking may be preferable to court proceedings, but you must understand the consequences.
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Check the disqualified directors register
Before appointing any director, search the Companies House register of disqualified directors to avoid compliance issues.