Director Disqualification

Understanding Director Disqualification: Key Points and Practical Steps

When it comes to managing a company, understanding the implications of director disqualification is crucial. Here, we break down the essentials of what disqualification means, the various types, the periods of disqualification, and the steps both individuals and companies should take if faced with this situation.

What is a Disqualification?

Under the Companies Act, a disqualified director is prohibited from acting as a director or being involved in the management of a company, either directly or indirectly.

Types of Disqualifications

1. Undischarged Bankruptcy: If an individual is an undischarged bankrupt, they are disqualified.

2. Conviction for Fraud or Dishonesty: Conviction for offenses involving fraud or dishonesty with imprisonment terms of three months or more leads to disqualification.

3. ACRA Filing Offences: Being convicted by the court of three or more ACRA filing offenses results in disqualification.

4. Company Strike-Offs: Having three or more companies struck off by ACRA within a five-year period leads to automatic disqualification.

Disqualification Periods

• Bankruptcy: Disqualification lasts until discharge from bankruptcy.

• Fraud or Dishonesty Conviction: A five-year disqualification period starting from the conviction date or the date of release from imprisonment.

• ACRA Filing Offences and Company Strike-Offs: A five-year disqualification period from the last conviction or the date the last company was struck off.

Handling Multiple Disqualifications

If an individual faces multiple disqualifications, the periods will run concurrently and will be lifted only when all relevant periods have ended.

Public Disclosure

The disqualified status is recorded in ACRA’s register and appears in the Business Profile of the company and the People’s Profile of the disqualified individual.

Notification and Actions

• ACRA Notification: There is no legal requirement for ACRA to notify companies of a director's disqualification.

• Individual’s Responsibility: Disqualified individuals should inform their companies to facilitate the removal process and find replacements.

• Company’s Responsibility: Upon notification, the company should appoint a new director and notify ACRA of the change.

Consequences of Non-Compliance

A disqualified individual who continues to act as a director without obtaining the necessary permissions may face prosecution, fines, and imprisonment.

Reinstatement

After the disqualification period ends, companies can reinstate the individual by re-appointing them as a new director.

Conclusion

Understanding the implications of director disqualification and adhering to the necessary steps can help ensure compliance with the Companies Act. Stay informed, act promptly, and maintain good corporate governance practices to navigate these challenging situations effectively.