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Explanatory Memorandum to Company Directors Disqualification (Northern Ireland) Order 2002

Background

4.The present system for disqualifying unfit directors was introduced by the Companies (NI) Order 1989.

5.In particular, that Order allows a court to make a disqualification order: against a director of an insolvent company whose conduct as a director of a company either on its own or when taken with his conduct of other companies is such as to make him in the view of the court unfit to be involved in the management of a company; orwhere the director has been convicted of a criminal offence in connection with the promotion, formation or management of a limited company.

6.The application for a disqualification order is made by the Department in cases where the conduct arose in a company which has become insolvent and in cases where the director has been convicted of an offence in connection with the promotion, formation or management of a limited company and a court has not made a disqualification order in consequence of the conviction.

7.From the making of the first disqualification order on 17 November 1994 the High Court has disqualified 176 directors on the application of the Department. A further 9 directors have been disqualified by the Crown Court following criminal proceedings.

8.At present disqualification can only be achieved by means of court proceedings.

Such proceedings can take a minimum of three months to hear in court but in practice often take between six and nine months even in cases where the directors are accepting that they will be disqualified and are only introducing mitigating circumstances or making representations on the period of disqualification.

9.This is an unduly long period and involves several court sittings which are expensive not only in court time but in legal costs on both sides.

10.The power to accept undertakings which the Order will confer on the Department will mean that, where there is agreement between the Department and the director that there is evidence of unfitness, disqualification can be achieved administratively, without an application to the court, by the director giving an undertaking to the Department. This should result in earlier disqualification for those who give an undertaking. It should also save court time and the expense of a court hearing.

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