When clients consider the possible consequences of pleading guilty to or being convicted of a criminal offence, they usually consider whether they will face a prison sentence, a community penalty, or a heavy fine.

While the substantive penalty is significant, there are times when there are more critical issues to address. We’ve looked at issues like confiscation in prior articles, and we’ll examine at director disqualification in this one.

What do business people need to consider?

When a person is convicted of an offence involving the mismanagement of a company, the Company Directors Disqualification Act of 1986 allows a court to issue a disqualification order.

Because the Act covers a wide range of events, the exact circumstances must be carefully assessed. Offenses committed outside the United States may qualify in specific circumstances. (see section 5A).

What conduct is relevant?

Both the internal and external management of the company are relevant to s 2(1) of the 1986 Act (Corbin (1984) 6 Cr App R (S) 17), as is a Director’s general conduct in running the affairs of the business (Georgiou (1988) 10 Cr App R (S) 137).

The court has extensive discretion in relation to most offences:

‘This is a completely general and unfettered power given by Parliament to courts on the occasion when a person is convicted of an indictable offence of that type. Parliament has decided not to give the sentencing court any guidance as to the way in which it ought to exercise its powers of disqualification in the very many and varied circumstances in which it may come to exercise those powers” (Young (1990) 12 Cr App R (S) 262).

What is a ‘disqualification order’?

The effect of the order is to prevent a person being involved in the future affairs of

[any] company:(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.

How long does the order last?

A magistrates’ court order has a maximum duration of five years, while a crown court order has a maximum duration of fifteen years (although this is lower for some offences).

The Court of Appeal has on occasion supported the making of lengthy orders, for example, one lasting eight years in R v Singh-Mann and Others [2014] EWCA Crim 717.

Will a guilty plea make any difference as to the length of the order?

A guilty plea will not act to reduce the disqualification period as discount for early plea does not apply to ancillary orders (Clayton [2017] EWCA Crim 49, [2017] All ER (D) 71 (Jan)).

Note however that it is inappropriate to order disqualification where the offender is conditionally discharged (Young (1990) 12 Cr App R (S) 262).

It may be inappropriate for a court to order compensation to be paid by a director who by virtue of the making of this type of order will be deprived of the ability to earn a living (Holmes (1992) 13 Cr App R (S) 29).

What happens if I breach the order?

Imprisonment of up to 2 years may be imposed if an order is breached.