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Explanatory Memorandum to Company Directors Disqualification (Amendment) (Northern Ireland) Order 2005

Background and Policy Objectives

Under the Company Directors Disqualification (Northern Ireland) Order 2002 (“the CDDO”) the courts can disqualify a person for a period of time on a number of grounds. If someone’s conduct while a director of a company which has become insolvent has been such that he is unfit to be concerned in the management of a company, he can be disqualified for between two and fifteen years either through the making of an Order by the Northern Ireland High Court or through the giving of an undertaking to the Department. The consequences are that he is forbidden, unless with the permission of the Court, to be a director of a company, to act as receiver of a company’s property or in any way, whether directly or indirectly, to be concerned in or take part in the promotion, formation or management of a company. He also cannot act as an insolvency practitioner.

To act in contravention of a disqualification order or undertaking constitutes a criminal offence attracting a prison sentence of up to two years and/or a fine. The person contravening the order and anyone acting on his behalf also become personally liable for his company’s debts.

The purpose of this Order is to include provision in the CDDO to extend the grounds on which the Northern Ireland High Court is able to make a disqualification order against a director to include the situation where his company has been in breach of competition law and his conduct as a director makes him unfit to be concerned in the management of a company. As an alternative to court proceedings the Office of Fair Trading (“OFT”) or a specified regulator would be able to accept an undertaking from the director which would have the same effect as a High Court Order.

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