An overview of the Company Directors Disqualification Act
The Company Directors Disqualification Act (CDDA) 1986 is an important part of UK company law because it outlines the procedures used to investigate and disqualify company directors who are suspected of misconduct. In particular, the act extended the grounds upon which the Court could grant a disqualification order, as well as extending the maximum period of disqualification to 15 years for directors found guilty of wrongful or fraudulent trading.
The CDDA consolidated a lot of legislation related to disqualification orders, and implemented the new concept of mandatory disqualification. Section 6 of the act describes the exact definition of directors’ disqualification, stating that a disqualified director cannot take part in the direction, management, promotion, or formation of a limited liability company in the UK, unless given leave by the Court.
A director who violates the terms of a disqualification order without leave of Court would be guilty of an offence and subject to a prison sentence of up to 2 years and/or a fine, and they may also be held personally liable for some or all of the debts of the insolvent company.
This act also laid out the standards for assessing unfitness, which are used to determine whether a director is fit to serve as the director of another company in the future based on their previous performance and conduct. Three types of disqualification are covered in the CDDA – mandatory, automatic, and ‘at the Court’s discretion’.
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