ACCA F4 - Corp and Business Law (ENG)

278 18: Company directors  Part F Management, administration and regulation of companies

5.3 Disqualification periods

In Re Sevenoaks Stationers (Retail) Ltd 1991 the Court of Appeal laid down certain 'disqualification

brackets'. The appropriate period of disqualification which should be imposed was a minimum of two to

five years if the conduct was not very serious, six to ten years if the conduct was serious but did not

merit the maximum penalty, and over ten years only in particularly serious cases.

Disqualification as a director need not mean disqualification from all involvement in management, and it

may mean that the director can continue to act as an unpaid director but only if the court gives leave to

act.

5.3.1 Mitigation of disqualification

Examples of circumstances which have led the court to imposing a lower period of disqualification

include the following.

 Lack of dishonesty

 Loss of director's own money in the company

 Absence of personal gain, for example excessive remuneration

 Efforts to mitigate the situation

 Likelihood of re-offending

 Proceedings hanging over director for a long time

5.4 Procedures for disqualification

Company administrators, receivers and liquidators all have a statutory duty to report directors to the

Government where they believe the conditions for a disqualification order have been satisfied.

The Secretary of State then decides whether to apply to the court for an order, but if they do decide to

apply they must do so within two years of the date on which the company became insolvent.

5.5 Acting as a director whilst disqualified

Acting as a director whilst disqualified is a serious offence and where it is committed, directors are

personally liable for the debts of the company.

6 Powers of directors

The powers of the directors are defined by the articles.

The powers of the directors are defined by the articles. The directors are usually authorised 'to manage

the company's business' and 'to exercise all the powers of the company for any purpose connected with

the company's business'.

Therefore they may take any decision which is within the capacity of the company unless either the Act

or the articles themselves require that the decision shall be taken by the members in general meeting.

6.1 Restrictions on directors' powers

Directors' powers may be restricted by statute or by the articles. The directors have a duty to exercise

their powers in what they honestly believe to be the best interests of the company and for the purposes

for which the powers are given.

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