Director disqualification: what conduct gets you banned, and for how long

Disqualification is a civil order, made by the court or accepted by undertaking, that bans a person from being a company director for between two and fifteen years. It follows a report from the liquidator, a decision by the Insolvency Service, and conduct of specific kinds. Running a company that failed is not one of them.

How a case starts

Every liquidator and administrator reports to the Insolvency Service on each director’s conduct within three months of appointment. The Insolvency Service reviews the report, may ask the office-holder for more, and decides whether it is in the public interest to seek a disqualification. It has three years from the start of the insolvency to issue proceedings. Where it decides to act, it writes to the director setting out the allegations and usually offers a disqualification undertaking as an alternative to court.

Around four in five disqualifications are by undertaking. The remainder go to court, where the Insolvency Service must prove the conduct and the court decides the period.

The conduct that leads to it

The Company Directors Disqualification Act 1986 lists matters the court considers, and the Insolvency Service’s published cases show which recur. In rough order of frequency:

• Treating the Crown as a lender. Trading for an extended period while not paying VAT, PAYE or corporation tax, so that HMRC funded the business involuntarily while other creditors were paid. This is the single most common allegation.
• Bounce Back Loan misconduct. Overstating turnover on the application, applying when ineligible, or using the money for personal purposes. 736 of the 1,036 disqualifications in 2024-25, with periods typically from six to eleven years.
• Failing to keep or deliver up accounting records, so that the liquidator cannot establish what happened to the company’s money.
• Transactions to the detriment of creditors: preferences to connected parties, assets transferred at undervalue, money taken out through the loan account as the company failed.
• Trading while insolvent to the detriment of creditors, overlapping with wrongful trading.
• Non-cooperation with the liquidator or the Official Receiver.
• Phoenix activity: moving the business to a new company and leaving the debts behind, particularly with the same or a similar name.
• Breaches of specific obligations: not filing accounts and returns, not paying over employees’ deductions, not holding client money properly.

The periods

The courts use three bands. Two to five years for less serious conduct, often a single failing such as Crown debt over a limited period. Six to ten years for serious conduct not meriting the top bracket: sustained Crown debt, Bounce Back Loan misuse, preferences, missing records. Eleven to fifteen years for the worst cases: dishonesty, large sums, repeat offenders. The average ban in 2024-25 was eight years, pulled upwards by the Covid loan cases.

What a ban prohibits

A disqualified person cannot, without the court’s permission, be a director of a company, act as one under any title, take part directly or indirectly in the promotion, formation or management of a company, or act as an insolvency practitioner. Breaching the order is a criminal offence and makes the person personally liable for the company’s debts incurred while they were involved. The ban is public, on a searchable register at Companies House.

It does not prevent employment, sole trading, or being a shareholder. The court can grant leave to act as a director of a specific company under conditions, and does so where the business is sound and others are safeguarded.

Responding to a letter

The Insolvency Service’s first letter sets out the allegations and invites representations. It matters. Take legal advice before replying, from a solicitor who does this work. The options are to contest the allegations, to argue for a shorter period, to accept an undertaking, or to negotiate the wording of the undertaking’s schedule of unfit conduct, which is public and follows you. Ignoring the letter leads to proceedings being issued and a court hearing where the Insolvency Service’s version is the only one before the judge.

Reducing the risk now

For a director whose company is failing today, the risk is reduced by the same things that protect against wrongful trading claims: stop building up Crown debt, do not prefer yourself or connected parties, keep the records and hand them over, cooperate fully, and take advice early. The Insolvency Service treats early advice and cooperation as mitigation, and treats their absence as aggravation.

What to do today

1. Check whether the company has been paying HMRC on time. If not, that is the first thing to address with a practitioner.
2. Gather the accounting records so they can be delivered up complete.
3. List any payments to yourself or connected parties in the last two years.
4. If you have already received a letter from the Insolvency Service, instruct a solicitor before you respond.