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Insolvency Law

Expert guidance on all aspects of corporate and personal insolvency

20 JUL 2011

Disqualifying IPs pursuant to sections 1 and 4 of the CDDA86 - Hunting the Miscreants

I conducted an interview with Mr Stephen Hunt of Griffins insolvency practitioners last week. This will hopefully go live in the next week or so. We covered lots of interesting ground. One particular novel point came up for consideration, namely, the potential for the disqualification of insolvency practitioners (IPs). Section 1 and section 4 of the Company Directors Disqualification Act 1986 (CCDA86) are of note in this regard. Section 1 notes that, inter alia:

 “1.— Disqualification orders: general.

(1) In the circumstances specified below in this Act a court may, and under [sections 6 and 9A]1 shall, make against a person a disqualification order, that is to say an order that [for a period specified in the order—]2


(a) he shall not be a director of a company, act as receiver of a company's property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court, and

(b) he shall not act as an insolvency practitioner.”

It is subsection (b) of section one that is of note for this blog entry. We must differentiate disqualification of an insolvency practitioner (IP) with the professional consequences of problematic conduct, i.e. the IP losing the licence to practice from their RPB or other professional body to which they are associated (Law Society, etc). that ground has most recently been critically examined by Professor Walters.

Section 4 is also of note. It states that:

"4.— Disqualification for fraud, etc., in winding up.(1) The court may make a disqualification order against a person if, in the course of the winding up of a company, it appears that he—

(a) has been guilty of an offence for which he is liable (whether he has been convicted or not) under [section 993 of the Companies Act 2006]1 (fraudulent trading), or

(b) has otherwise been guilty, while an officer or liquidator of the company [receiver of the company's property or administrative receiver of the company]2 , of any fraud in relation to the company or of any breach of his duty as such officer, liquidator, [receiver or administrative receiver]2 .

(2) In this section “the court” means any court having jurisdiction to wind up any of the companies in relation to which the offence or other default has been or is alleged to have been committed; and “officer” includes a shadow director.

(3) The maximum period of disqualification under this section is 15 years."

There has been one reported case on the disqualification of liquidators pursuant to this section. In Re Adbury Park Estates Ltd [2003] B.C.C. 696, the claimant (a shareholder and former director of the company), applied under the CDDA86 s.4 to disqualify the defendants from acting as the company's liquidators. This was because of their alleged fraud and breach of duty. 

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