How does someone get banned from the boardroom and disqualified as a company director?
A company director can be disqualified (banned) if they fail to meet their legal responsibilities. Anyone can also report a company director’s conduct as being ‘unfit’.
‘Unfit conduct’ includes:
- Allowing a company to continue trading when it can’t pay its debts and is insolvent
- Not keeping proper company accounting records
- Not sending accounts and returns to the company registration office or Companies House
- Not filing or paying tax owed by the company
- Using company money or assets for personal benefit
How to get disqualified as a company director
In most jurisdictions, automatic disqualification by a court happens if that person is convicted of any offence under the Companies Act or involving fraud or dishonesty.
An example of someone being disqualified as a company director
You don’t have to look too far when looking for examples of directors being disqualified and banned from the boardroom. In business, people are disqualified as directors every day for breaches of their duties and bad governance.
One case that stands out is the case of Wrightbus in Northern Ireland.
The 2019 collapse of Co Antrim-based bus manufacturer Wright Motors resulted in a record 14 people facing legal sanctions, including all three adult children of late founder William Wright.
The Belfast Telegraph reported that Jeff Wright, the former owner of the Ballymena company and son of William Wright, faces directors’ disqualification by Northern Ireland’s Department for the Economy (DfE) because he had been a shadow director.
During the investigation, it was revealed that 13 more people with involvement in the business could also be banned from acting as company directors.
DfE’s Insolvency Service has brought the civil action.
What happened in the Wrightbus case?
- A total of five Wrightbus companies went bankrupt: Wrightbus, Wright En-Drive, Wright Composites, Wrights Group, and Metallix.
- When Deloitte was appointed administrator in September 2019, creditors were owed £60m.
- The main Wrightbus business was sold in 2019 to Bamford Bus Company, which has since recovered well.
Conduct that can lead to a boardroom ban
Conduct that can lead to a boardroom ban includes:
- Continuing to trade to the detriment of creditors at a time when the company was insolvent;
- Failing to keep proper accounting records;
- Failing to prepare and file accounts or make returns to the Companies Registry;
- Failing to submit tax returns or pay tax or other money due;
- And failing to cooperate with the receiver/insolvency practitioner.
Commenting on the action, Mr Wright said: “I am disappointed that the department has decided to initiate these proceedings.
“I have cooperated with the administrators and the department in the administration of the Wright Group of companies.
“I hope to have an opportunity to tell my side of the story, but in light of the proceedings, I am not in a position to provide any further comment at this stage.”
Before it collapsed, Wrightbus had been in business for more than 70 years.
Deloitte reported in 2019 that the group had lost £19.5m in the first eight months of the year, up from £13.5m in 2018. A decline in sales was also observed, from £212.6m in 2017 to £103.8m in 2019.