Thursday, 21 November 2013

How are Director Disqualification Undertakings offered?

Ordinarily, the Secretary of State (or its lawyers) will write to an individual whom they believe should be disqualified giving them the choice of accepting a voluntary undertaking to be disqualified instead of dealing with the matter by issuing formal legal proceedings. 

These letters are commonly known as Section 16 letters as they are written pursuant to Section 16 of the Company Director Disqualification Act 1986. A section 16 letter will summarise the nature of the allegations against an individual and then offer a period of voluntary disqualification (ranging between 2-15 years for Section 6 disqualification claims) which can be accepted by the individual in lieu of formal legal proceedings. 

A section 16 letter is normally accompanied by various information booklets on the effect of disqualification and outlining the various procedures and options open to that individual if they wish to continue acting as a director despite the disqualification undertaking.  This is most commonly referred to as seeking leave under Section 17 of the Company Director Disqualification Act 1986.