History
Lord Millett, in the opinion he gave in Official Receiver v Wadge Rapps & Hunt UKHL 49 (31 July 2003), summarized the history of disqualification orders in British company law, noting that they were originally created under s. 75 of the Companies Act 1928 (subsequently consolidated as s. 275 of the Companies Act 1929), which was enacted on the recommendation of the Report of the Company Law Amendment Committee (1925-1926) under the chairmanship of Mr Wilfrid Greene KC (Cmd 2657). It gave the official receiver, the liquidator or any creditor or contributary the ability to apply to the court having jurisdiction to wind up the company, for an order to disqualify a director from being concerned in the management of a company for a period up to five years. Such order was up to the discretion of the court.
The scope of that provision was subsequently expanded as follows:
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- S. 33 of the Companies Act 1947 (subsequently consolidated as section 188 of the Companies Act 1948), following the Report of the Committee on Company Law Amendment (1945) under the chairmanship of Cohen J (Cmd 6659), extended the grounds upon which a disqualification order could be made.
- S. 28 of the Companies Act 1976 provided for the case where a person had been persistently in default in relation to statutory requirements for returns, accounts or other documents. Such an order could only be sought by the Secretary of State, as it was not a requirement that the company should be insolvent or in the course of winding up.
- S. 9 of the Insolvency Act 1976 covered the case where a person had been a director of more than one company which had gone into liquidation while insolvent and his conduct as a director of any of those companies made him unfit to be concerned in the management of a company.
- S. 93 of the Companies Act 1981 extended the maximum period of disqualification to 15 years.
The CDDA consolidated the law relating to disqualification orders and introduced the concept of mandatory disqualification, following up on Sir Kenneth Cork's recommendations in the Insolvency Law and Practice, Report of the Review Committee (1982) (Cmnd 8558). That report recommended that application for a mandatory order should be made by the liquidator or, with the leave of the court, by a creditor. This was not acceptable to Parliament, which understandably considered that greater safeguards are necessary in the case of a mandatory order than are required where the court retains a discretion to decline to make an order.
Read more about this topic: Company Directors Disqualification Act 1986
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