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  • Re Lo-Line Electric Motors LTD (1986) : "What Is The Proper Approach To

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    Director disqualification under the Company Directors Disqualification Act 1986 can occur under several sections, including for fraud, unfitness shown by conduct resulting in insolvency, and participation in wrongful trading. The primary purpose of disqualification is to protect the public from future harm rather than to punish individuals. A director can be found unfit and disqualified for five years for lack of financial control leading to insolvency of multiple companies, as incompetence does not need to be total. Directors have a collective responsibility to inform themselves about company affairs and not allow domination by any one director. Creditors' interests must be considered once insolvency risk arises, and contractually directors must ensure debt repayments and covenant observance even when solvent

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    Company law lecture on director disqualification

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    Company Law 09.02

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    Director disqualification under the Company Directors Disqualification Act 1986 can occur under several sections, including for fraud, unfitness shown by conduct resulting in insolvency, and participation in wrongful trading. The primary purpose of disqualification is to protect the public from future harm rather than to punish individuals. A director can be found unfit and disqualified for five years for lack of financial control leading to insolvency of multiple companies, as incompetence does not need to be total. Directors have a collective responsibility to inform themselves about company affairs and not allow domination by any one director. Creditors' interests must be considered once insolvency risk arises, and contractually directors must ensure debt repayments and covenant observance even when solvent

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    16 views2 pages

    Re Lo-Line Electric Motors LTD (1986) : "What Is The Proper Approach To

    Uploaded by

    CaioSebastianCaichaElkington
    Director disqualification under the Company Directors Disqualification Act 1986 can occur under several sections, including for fraud, unfitness shown by conduct resulting in insolvency, and participation in wrongful trading. The primary purpose of disqualification is to protect the public from future harm rather than to punish individuals. A director can be found unfit and disqualified for five years for lack of financial control leading to insolvency of multiple companies, as incompetence does not need to be total. Directors have a collective responsibility to inform themselves about company affairs and not allow domination by any one director. Creditors' interests must be considered once insolvency risk arises, and contractually directors must ensure debt repayments and covenant observance even when solvent

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    Company Law

    09.02.2015
    Director disqualification
    Company Directors Disqualification Act 1986:

    S.4 fraud, including fraudulent trading under S.993 CA 2006.


    S.6 unfitness shown by conduct whilst director of an insolvent company
    S.10 participation in wrongful trading

    Re Lo-Line Electric Motors LTD [1986]: What is the proper approach to


    deciding whether someone is unfit to be a director? The approach adopted in all
    the cases to which I have been referred is broadly the same. The primary
    purpose of the section is not to punish the individual but to protect the public
    against the future conduct of companies by persons whose past records as
    directors of insolvent companies have shown them to be a danger to creditors
    and others. Therefore, the power is not fundamentally penal
    RE Sevenoaks Stationers (Retail) LTD [1991]: Mr Cruddas was a director of
    five companies which entered insolvent liquidation. The main reason was lack of
    financial control for which Mr Cruddass was responsible as an accountant. He
    was disqualified for five years for being unfit to direct a company: I do not think
    it is necessary for incompetence to be total as suggested in Re Lo-Line Electric
    Motors.
    Re Westmid Packing Services LTD [1998]: Directors have a collective
    responsibility, based on the individual responsibility of each director to inform
    himself about the companys affairs. Directors should not allow one director to
    dominate them. The directors allowed themselves to be cowed and were
    excluded from the accounts and important management information.
    Creditors and corporate governance
    Directors must have regard to the interests of creditors once there is a risk of
    insolvency: West Mercia Safetywear LTD v Dodd.
    Where a company is solvent, contractually directors still have to ensure debt
    repayments are made and that covenants to lenders are observed.
    -

    Shadow directors

    Section 170(5) CA 2006: The general duties apply to shadow directors where,
    and to the extent that, the corresponding common law rules or equitable
    principles so apply.
    Dubai Aluminium Co Ltd v Salaam [1999]: Shadow directors do not deal directly
    with corporate assets and would not usually owe fiduciary duties.
    Ultraframe (UK) LTD v Fielding:
    -

    De facto directors

    Commissioners of HM Revenue and Customs v Holland [2010]: for a de facto


    director to owe a fiduciary duty he/she would need to be part of the corporate
    governing structure.

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