
Facing director disqualification is a daunting prospect for anyone involved in running a company in the UK. If you or someone you know is at risk of being disqualified as a company director, you may be feeling anxious about the potential legal consequences, including whether a suspended sentence is possible if criminal proceedings are involved. The process can seem complex and intimidating, especially if you are unfamiliar with the legal system. This article will explain what director disqualification means, the penalties you might face, and whether a suspended sentence is a realistic outcome.
Director disqualification is a legal process that prevents an individual from acting as a director of a company, or from being involved in the management, formation, or promotion of a company, for a specified period. This sanction is imposed under the Company Directors Disqualification Act 1986 (CDDA) and is designed to protect the public, creditors, and the business community from individuals whose conduct has demonstrated that they are unfit to manage a company.
Disqualification can arise from a range of circumstances, including wrongful trading, fraudulent trading, persistent breaches of company law, failure to keep proper accounting records, or involvement in serious misconduct such as misappropriation of company funds. In some cases, disqualification follows civil proceedings, but in more serious cases, criminal charges may also be brought against the director. The length of a disqualification order can range from two to fifteen years, depending on the severity of the misconduct.
The Insolvency Service, acting on behalf of the Secretary of State, is responsible for investigating directors’ conduct and bringing disqualification proceedings. In addition to being barred from acting as a director, a disqualified individual may also face criminal prosecution if their actions amount to a criminal offence, such as fraud or theft. In such cases, the court may consider imposing a custodial sentence, which raises the question of whether that sentence could be suspended.
Director disqualification itself is not a criminal sentence but a civil restriction. However, if the conduct leading to disqualification involves criminal behaviour – such as fraudulent trading, false accounting, or theft – the director may be prosecuted in the criminal courts. The penalties for criminal offences related to company management can be severe, including imprisonment, fines, or both.
For example, fraudulent trading under the Insolvency Act 1986 can result in a prison sentence of up to ten years, an unlimited fine, or both. Similarly, offences under the Companies Act 2006, such as failing to keep proper accounting records or making false statements, can attract significant penalties. The court will consider the nature and seriousness of the offence, the harm caused, and the director’s personal circumstances when determining the appropriate sentence.
Not all criminal convictions result in immediate imprisonment. Depending on the facts of the case, the court may impose a community order, a financial penalty, or a suspended sentence. The decision will depend on the specific circumstances of the offence and the individual’s background.
A suspended sentence is a custodial sentence that is not activated immediately. Instead of being sent to prison straight away, the individual is allowed to remain in the community for a specified period, which is usually between six months and two years, provided they comply with certain conditions, such as performing unpaid work.
If the individual complies with all the requirements and does not commit any further offences during the suspension period, they will not have to serve the prison sentence. That said, if they breach the conditions or are convicted of another offence during the suspension period, the original sentence can be activated, and they may be sent to prison.
More requirements may be imposed, such as regular meetings with probation officers, participation in restorative justice programmes, or restrictions on holding directorships or other positions of responsibility. While a suspended sentence allows the individual to avoid immediate imprisonment, it remains a criminal conviction and will appear on their record, potentially affecting future employment and professional opportunities.
A suspended sentence is possible in cases where director disqualification is accompanied by criminal charges and a custodial sentence is being considered. The court will assess the seriousness of the offence, the director’s personal circumstances, and the likelihood of reoffending. If the judge is satisfied that immediate imprisonment is not necessary and that the individual poses a low risk of further offending, a suspended sentence may be imposed.
For instance, if the director’s involvement in the misconduct was limited, they have no previous convictions, and they have shown genuine remorse, the court may be more inclined to suspend the sentence. Conversely, if the offence involved significant dishonesty, caused substantial harm to creditors or the public, or was part of a pattern of repeated misconduct, a suspended sentence becomes less likely.
Note that a suspended sentence is only available for certain offences and is subject to the court’s discretion. The judge will consider all the circumstances of the case before deciding whether suspension is appropriate.
In deciding whether to suspend a custodial sentence in cases involving director disqualification, the court will consider a range of factors:
Mitigating factors, such as genuine remorse, cooperation with the authorities, or steps taken to address underlying issues (such as addiction or financial hardship), can work in the individual’s favour. On the other hand, aggravating factors, such as repeated offending, attempts to conceal misconduct, or targeting vulnerable people, can make a suspended sentence less likely.
Strong community ties, stable employment, and family support can also help demonstrate that the individual is unlikely to reoffend. However, a history of similar offences or a lack of accountability can reduce the chances of avoiding prison.
Prison sentences are generally reserved for the most serious cases of director misconduct that result in criminal charges. Several factors increase the likelihood of a custodial sentence:
Remember that if the offence was genuinely out of character, the financial impact was limited, or there are compelling personal circumstances (such as serious illness, a genuine effort at restitution, or a demonstrable lack of understanding of the full implications of the actions), the court may consider alternatives to prison.
Being proactive improves your chances of receiving a suspended sentence:
If you or someone you care about is in the difficult situation of facing these charges, remember that early intervention can make a significant difference to the outcome of your case. The fraud team at Stuart Miller Solicitors has extensive experience in defending clients accused of company law breaches and related criminal offences, and we offer confidential, no-obligation consultations to discuss your situation and outline your options. Get in touch to arrange yours today.
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