[1] A couple of points here:

1) the disqualification, where imposed by Court order at least, will be wider than simply prohibiting the disqualified person from acting as a company director. See footnote [3a] for the typical disqualification order wording.

(2) Whether the prohibition extends to being a director of an overseas company, was considered in the permission to appeal case of Re Westminster Property Management Ltd (also known as Official Receiver v Stern (No.2)) [2001] EWCA Civ 111; [2002] BCC 937 ('Westminster Property (Court of Appeal'). In Westminster Property (Court of Appeal), the Court of Appeal refused the applicant/would be appellant permission to appeal the decision of Lloyd J in [2001] BCC 305, wherein Lloyd J had refused the director's application for leave to act while disqualified in relation to, amongst other companies, six foreign incorporated companies. Westminster was in turn considered by the Deputy High Court Judge in Sherling v Competition and Markets Authority [2021] EWHC 2463 (Ch)(Sherling) and it is convenient simply to refer to Sherling. In Sherling, the section 17 leave applicant (subject to a competition disclosure undertaking i.e. a CDU) sought leave to act as director in respect 9 companies, one of which JMR, was registered outside England and Wales. In Sherling, it was common ground that:

‘...the court has jurisdiction to consider the claimants' application for leave to act in relation to JMR and that the CDUs would otherwise affect each of the claimant's ability to act as a director of JMR. "Company" is defined in section 22(2) of the CDDA and it includes a company that may be wound up under Part V of the Insolvency Act 1986 (unregistered companies - section 22(2)(b)). In Re Westminster Property Management Ltd (No. 2), Official Receiver v Stern [2001] BCC 305, Lloyd J applied the Latreefers test of the three core requirements which must be satisfied for asserting jurisdiction to wind up such a company. Firstly, there must be a sufficient connection to the jurisdiction which may but does not necessarily have to include assets within the jurisdiction. Secondly, there must be a reasonable possibility of benefit to someone applying for a winding up order, and, thirdly, one or more persons interested in the distribution of the assets of the company must be persons over whom the court can exercise a jurisdiction.’ (paragraph 19)

The Deputy High Court Judge continued, at paragraphs 20 to 21:

'There has been a debate between the court and counsel over how easy it is to apply all three requirements of that test, which is designed to be applied in the context of a winding up petition to wind up an unregistered company, to a situation such as the present where it is simply intended to found a jurisdiction to grant leave for a director to act notwithstanding qualification. The difficulty is that there is not a winding up petition, there is not someone applying for a winding up order, there will be no distribution of assets, and it therefore raises a difficult hypothetical question to answer whether the second and third requirements, in particular, are satisfied and I gather that there is some debate amongst academics such as Walters and Davies White QC as to whether that is the correct test to apply.

It is, in the end, not a question which I need to decide in this case. It seems to me that, in essence, the court is being asked to see whether there is some legitimate purpose to be achieved by the court if it were to assert its jurisdiction over a foreign company and if there is, then it has sufficient jurisdiction for the purposes of section 22(2) of the CDDA. However, as I say, it does not arise in this case because I am satisfied that all three of the requirements of the Latreefers test are, in this case, made out.

After setting out JMR's: (1) various transactions within England and Wales; and (2) substantial creditors and debtors in England and Wales, the Deputy High Court Judge the Sherling said, at paragraph 23:

'In these circumstances, it seems to me that JMR has a substantial connection with the jurisdiction through its trading relationship and lending relationship with persons in the jurisdiction. It had assets in the jurisdiction to be administered in the event of a winding up for the benefit of anyone who was interested in such a winding up and it is a wholly-owned subsidiary of a company within the jurisdiction who would be interested in any distribution of JMR's assets. In these circumstances, I accept that I have jurisdiction to grant leave as sought by the claimants in respect of JMR'

[2] The main disqualifying provisions include (a non-exhaustive list):

(1) section 1 - which provides for disqualifications orders ('DDOs')

(2) section 4 - disqualification route for fraud etc., in the course of a winding up; see for example, Re Asegaai Consultants Ltd; Wood v Mistry [2012] EWHC 1899 (Ch) Newey J;

(3) section 6 - disqualification orders against directors of company which has become insolvent, where director’s misconduct makes that person unfit to be concerned in the management of a company. It is this ground that is most frequently used - and so some additional explanation is provided below.

The matters to which the court is to have regard in determining unfitness under section 6, are set out in section 12C (as from 1 October 2015; formerly section 9) of, and Sch 1 to, the CDDA.

While the whole of section 12C should be read, the most salient subsection is subsection 12C(4), which reads:

'In making any such determination in relation to a person, the court or the Secretary of State must

(a) in every case, have regard in particular to the matters set out in paragraphs 1 to 4 of Schedule 1;

(b) in a case where the person concerned is or has been a director of a company or overseas company, also have regard in particular to the matters set out in paragraphs 5 to 7 of that Schedule.'

Schedule 1 - Schedule 1 Determining Unfitness etc: Matters to be taken into Account - Section 12C - Matters to be taken into account in all cases

'1 The extent to which the person was responsible for the causes of any material contravention by a company or overseas company of any applicable legislative or other requirement.

2 Where applicable, the extent to which the person was responsible for the causes of a company or overseas company becoming insolvent.

3 The frequency of conduct of the person which falls within paragraph 1 or 2.

4 The nature and extent of any loss or harm caused, or any potential loss or harm which could have been caused, by the person’s conduct in relation to a company or overseas company.

Additional matters to be taken into account where person is or has been a director

5 Any misfeasance or breach of any fiduciary duty by the director in relation to a company or overseas company.

6 Any material breach of any legislative or other obligation of the director which applies as a result of being a director of a company or overseas company.

7 The frequency of conduct of the director which falls within paragraph 5 or 6.

Interpretation

8 Subsections (1A) to (2A) of section 6 apply for the purposes of this Schedule as they apply for the purposes of that section.

9 In this Schedule “director” includes a shadow director.'

For 4 recent cases reviewing section 6 directors disqualifications, see:

(i) Secretary of State for Business, Energy and Industrial Strategy v Rajgor [2021] EWHC 1239 (Ch) a decision of Judge Mithani QC sitting as a Judge of the High Court; and

(ii) Re Keeping Kids [2021] EWHC 175 (Ch)(also known as Official Receiver v Batmanghelidjh)(‘Keeping Kids’) a decision of Falk J;

(iii) Re X E Solutions Ltd (no.07025602); sub nom Secretary of State for Business, Energy and Industrial Strategy v Selby [2021] EWHC 3261 (Ch), a decision of ICCJ Prentis - particularly from paragraph 14

(iv) Re Asset Land Investment Plc  [2022] EWHC 21 (Ch), a decision of Deputy ICCJ Greenwood, particularly, paragraph 13, where he said:

'In Secretary of State for Business, Innovation and Skills v Chohan [2013] EWHC 680 at [170]-[171], having said that the test for unfitness under section 6 has been the “subject of analysis, exploration, elaboration and refinement in a multitude of cases”, Hildyard J. stated the following propositions, which I understood to be accepted by both parties, and which in any event, I do accept:

“(1) The court is required by s.[12C] of the CDDA to have particular regard to the matters mentioned in Sch.1 to that Act.

(2) However, Sch.1 to the CDDA is not exhaustive: the court is entitled to take into account other conduct in order to determine the question of unfitness: any misconduct of a person exercising the powers of a director may be relevant.

(3) “Unfitness” is ultimately a question of fact, or, as Dillon LJ stated in Re Sevenoaks Stationers (Retail) Ltd [1991] Ch. 164 … “what used to be pejoratively described in the Chancery Division as ‘a jury question’”: but, as the authorities demonstrate, a less pejorative and possibly more accurate description may be a “value judgment” (see Re Grayan Building Services Ltd [1995] Ch. 241 at 255D …). As such, that determination of unfitness involves a comparison with a standard of behaviour against which the conduct complained of may be measured.

(4) Accordingly, as explained by Hoffmann LJ (as he then was) in Re Grayan at 254G …:

“The judge is deciding a question of mixed fact and law in that he is applying the standard laid down by the courts (conduct appropriate to a person fit to be a director) to the facts of the case.”

(5) It being a major concern of the CDDA to raise standards and to protect those who deal with companies which have the benefit of limited liability from directors who have in the past departed from such standards, a finding of unfitness does not depend upon a finding of lack of moral probity: the touchstone is lack of regard for and compliance with proper standards, and breaches of the rules and disciplines by which those who avail themselves of the great privileges and opportunities of limited liability must abide (see per Henry LJ in Re Grayan).

(6) Equally, ordinary commercial misjudgement is in itself insufficient to demonstrate unfitness (see per Browne-Wilkinson VC (as he then was) in Re Lo-Line Electric Motors Ltd [1988] Ch. 477, 486 …): risks that have eventuated may in retrospect, and with the wisdom of hindsight, appear to have been taken wrongly, but the purpose of limited liability is to provide some protection from risk-taking, subject to proper standards of care and compliance with duty.

(7) As, again, Hoffmann LJ put it in Re Grayan, the court:

“must decide whether that conduct, viewed cumulatively and taking into account any extenuating circumstances, has fallen below the standards of probity and competence appropriate for persons fit to be directors of companies.”

(8) Although the touchstone of unfitness should reflect the public interest in promoting and raising standards amongst those who manage companies with the benefit of limited liability, the test is always whether the conduct complained of makes the defendant unfit, and not whether it is more generally in the public interest that a person be disqualified: thus, for example, the question is whether the present evidence of the director’s past misconduct makes him unfit, not whether the defendant is likely to behave wrongly again in the future.

(9) In each case the court must consider the director’s personal responsibility: it is his personal conduct which is in issue, and it is not sufficient to assume responsibility for some departure from required standards in the management of the company from the fact of his being a director.

(10) Nevertheless, a “broad brush” is not inappropriate (see Re Barings Plc (No.5); Secretary of State for Trade and Industry v Baker [1999] 1 B.C.L.C. 433, 483, approved by the Court of Appeal [2001] B.C.C. 273, 283), and “responsibility” is not confined to direct executive responsibility for the particular misconduct, and a failure to engage in proper supervision, review or scrutiny of the activities of delegates or fellow directors may suffice (see Re Skyward Builders Plc; Official Receiver v Broad [2002] EWHC 2786 (Ch) at [393]).

(11) The court must consider any allegations of misconduct both individually and in the round: Secretary of State for Trade & Industry v McTighe [1997] B.C.C. 224 (CA).”

(4) section 1A - disqualification undertakings (‘DDU’), where (a) the circumstances specified in sections 5A, 7, 8, 8ZC and 8ZE arise; (b) the director offers and the Secretary of State is willing to accept, such a disqualification undertaking;

(5) section 8 - disqualification orders where director’s conduct in relation to the company/ies makes him unfit to be concerned in the management of a company;

(6) section 9A - competition disqualification orders (‘CDO’), where (a) an undertaking which is a company of which he is a director commits a breach of competition law; and (b) his conduct as a director makes him unfit to be concerned in the management of a company;

In Sherling, the Deputy High Court Judge said, at paragraph 8:

‘…an order must be made under section 9A of the CDDA if the director's conduct:

"…viewed cumulatively and taking into account any extenuating circumstances has fallen below the standards of probity and competence appropriate for persons fit to be directors of companies."

(Re Grayan Building Services Ltd [1995] Ch 241 and see also Competition and Markets Authority v Martin [2020] EWHC 1751 (Ch)).’

(7) section 9B - competition disqualification undertakings (‘CDU’), where: (a) an undertaking which is a company of which he is a director has committed or is committing a breach of competition law; and (b) the conduct of the person as a director makes him unfit to be concerned in the management of a company; and the person offers to give a disqualification undertaking; and

(8) section 10 - disqualification where the court has found wrongful trading; see for example: Re Brian D Pierson Contractors Ltd [1999] B.C.C. 26

(9) sections 2 and 5 - for disqualifications linked to the commission of crimes.

In Penrose v Official Receiver [1996] 1 WLR 482 (a section 216(3) permission to re-use a name application case), Chadwick J said of the provisions of the Company Directors Disqualification Act 1986 ('Disqualification Act'), at 487-488:

'The Disqualification Act was enacted as part of the corpus of insolvency legislation of which the Insolvency Act 1986 itself forms the principal statute. That legislation came into force, together, on 29 December 1986. Sections 2, 3, 4, 5 and 6 of the Disqualification Act prescribe circumstances in which the court may - or, in the case of section 6, must - make a disqualification order against a person who has been a director of a company.

Section 2 of the Disqualification Act empowers the court to make a disqualification order against a person who has been convicted of an indictable offence in connection with the formation or management of a company. Section 3 enables the court to make such an order where a person has been persistently in default in relation to the keeping or filing of accounts and returns. Section 4 applies in cases where the person against whom the order is to be made has been guilty of an offence of fraud; and section 5 applies in cases of summary conviction.

Section 6 is in these terms:

“Duty of court to disqualify unfit directors of insolvent companies.

“(1) The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied —

(a) that he is or has been a director of a company which has at any time become insolvent (whether while he was a director or subsequently), and

(b) that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of any other company or companies) makes him unfit to be concerned in the management of a company.”

Subsection (2) describes the circumstances in which a company is taken to have become insolvent....Subsection (3) of section 6 identifies the court in terms...

Section 7 of the Disqualification Act empowers the Secretary of State to apply for an order under section 6 if it appears to him that it is expedient in the public interest that a disqualification order should be made against any person. The application can be made by the official receiver in the case where the company is being wound up by the court.

Section 9 of the Disqualification Act requires the court, when determining whether a person's conduct as a director makes him unfit to be concerned in the management of a company, to have regard to matters in Schedule 1 to the Act. Those matters include misfeasance, breach of fiduciary duty, the extent of his responsibility for entering into avoidable transactions, failure to keep accounts and other matters of that nature.'

Potter LJ in R v Edwards [1998] 2 Cr App R (S) 213 , 215–216, pithily stated:

“The rationale behind the power to disqualify is the protection of the public from the activities of persons who, whether for reasons of dishonesty, or of naivety or incompetence in conjunction with the dishonesty of others, may use or abuse their role and status as a director of a limited company to the detriment of the public.”

As to the length of disqualification, in Re Westmid Packing Services Ltd (also known as Secretary of State for Trade and Industry v Griffiths) [1998] 2 All ER 124, the Court of Appeal (Lord Woolf MR, Waller and Robert Walker LLJ) said, obiter, at 131, 'We also wish to give some general guidance as to what is relevant and admissible evidence for the purpose of determining the length of the disqualification period, and for the purposes of any application under s 17 of the Act.' The guidance involves long passages but it pays to set them out in full. Of particular relevance to the topic of this article - section 17 leave applications - is (i) point (2); (ii) the end of point (4); and (iii) end of point (5); (iv) the quote from Hoffman LJ in Re Grayan Building Services Ltd (in liq) [1995] 1 BCLC 276 in point (6); (v) the end of the In Re Barings plc Sir Richard Scott V-C quote in point (7) 

'(1) It is of the greatest importance that any individual who undertakes the statutory and fiduciary obligations of being a company director should realise that these are inescapable personal responsibilities. The appellants may have been dazzled, manipulated and deceived by [the controlling influence director] but they were in breach of their own duties in allowing this to happen. They can count themselves fortunate to have received the minimum period of disqualification and to have had the benefit of immediate orders under s 17 of the Act.

(2) Where the court knows or expects that an application under s 17 will be made immediately after, or soon after the making of a disqualification order, and the court is minded to grant leave under s 17, that is no reason for deciding to impose the minimum period of disqualification. An order under s 17 gives leave only in respect of one or more specified companies, and may be subject to quite stringent conditions. The power to grant leave under s 17 is irrelevant to determining the proper period of disqualification.

(3) In Re Lo-Line Electric Motors Ltd [1988] 2 All ER 692, [1988] Ch 477 Browne-Wilkinson V-C said that the primary purpose of s 300 of the Companies Act 1985 was to protect the public against the future conduct of companies by persons whose past records as directors of insolvent companies showed them to be a danger to creditors and others. That statement has often been approved by this court. But there is often a considerable time lag between the conduct complained of, its discovery and the disqualification proceedings actually coming to court. We return below (para 9) to what can be done to avoid delay. One result of delay when it does occur is that there are occasions when disqualification must be ordered even though, by reason of the director's recognition of his previous failings and the way he has conducted himself since the conduct complained of, he is in fact no longer a danger to the public at all. In such cases it is no longer necessary for the director to be kept 'off the road' for the protection of the public, but other factors come into play in the wider interests of protecting the public, ie a deterrent element in relation to the director himself and a deterrent element as far as other directors are concerned. Despite the fact that the courts have said disqualification is not a 'punishment', in truth the exercise that is being engaged in is little different from any sentencing exercise. The period of disqualification must reflect the gravity of the offence. It must contain deterrent elements. That is what sentencing is all about, and that is what fixing the appropriate period of the disqualification is all about. What Vinelott J (in Re Pamstock Ltd [1994] 1 BCLC 716 at 737) called 'tunnel vision', ie concentration on the facts of the offence, is necessary when considering whether a director is unfit. In relation to the period of disqualification the facts of the offence are still obviously important but many other factors ought (and in reality do) come into play (see further paras 5 to 7 below).

(4) As will appear hereafter there is much in the judgment of Sir Richard Scott V-C in Re Barings plc, Secretary of State for Trade and Industry v Baker (29 July 1997, unreported) with which we agree, but the following observation may in our view need qualification. Sir Richard Scott V-C said:

'There is in my view no real place for discounts to be allowed to a director who has assisted the court in its disposal of court business by not disputing that which is indisputable. Plea bargains have no place in this jurisdiction.'

In the criminal sentencing context (which is clearly what the Sir Richard Scott V-C had in mind) there is no room for plea bargaining if by that it is meant some form of agreement as to the sentence if a plea is entered. But there can be negotiation as to the acceptability of an admission on a certain basis of fact, and that would seem to be as sensible in this context as in the criminal context. That is indeed already recognised in the Carecraft procedure (see Re Carecraft Construction Co Ltd [1993] 4 All ER 499, [1994] 1 WLR 172). Furthermore in the criminal context very little discount is given if there is an admission of what is 'indisputable', but an admission of what might otherwise have taken a great deal of time and expense to prove surely merits some recognition, provided of course that the starting point correctly reflects the gravity of the conduct. We do not consider that it would send out a wrong message to fix the period of disqualification by starting with an assessment of the correct period to fit the gravity of the conduct, and then allowing for the mitigating factors, in much the same way as a sentencing court would do. It would not, however, be right to allow the question whether a discretion is likely to be exercised under s 17 to come into the calculation at all. That question should be considered separately after a period of disqualification has been fixed.

(5) That leads on to the question of what categories of evidence should be admitted on the three (logically and procedurally) distinct issues: (i) is a director unfit within the meaning of the Act? (ii) if so, how long should be his period of disqualification? and (iii) at what stage (if any) of his disqualification, in respect of what company or companies and on what conditions, should leave be granted under s 17? Here we wish to discourage the belief that there is a complicated, arcane and inflexible code of evidential rules applicable in these cases. In most cases the essential thing will be for the court, with the assistance of the parties, to use common sense and to adopt a practical and flexible approach to case management, so as to confine the evidence to that which is probative (see Re Dawes & Henderson (Agencies) Ltd (in liq), Secretary of State for Trade and Industry v Dawes [1997] 1 BCLC 329). While the director's general reputation may be relevant on questions of the appropriate period of disqualification and leave under s 17 detailed or repetitive evidence should not be allowed.

(6) What matters are relevant to the length of the period of disqualification has been considered (at least in passing) by this court in Re Grayan Building Services Ltd (in liq) [1995] 1 BCLC 276, [1995] Ch 241 and at first instance in Re Dawes & Henderson (Agencies) Ltd (in liq) and in Re Barings plc. In Re Grayan Building Services Ltd (in liq) [1995] 1 BCLC 276 at 285, [1995] Ch 241 at 254 Hoffmann LJ, after citing Re Swift 736 Ltd, said:

'it must be remembered that a disqualified director can always apply for leave under s 17 and the question of whether he has shown himself unlikely to offend again will obviously be highly material to whether he is granted leave or not. It may be relevant by way of mitigation on the length of disqualification, although I note that the guidelines in Re Sevenoaks Stationers (Retail) Ltd [1991] BCLC 325, [1991] Ch 164 are solely by reference to the seriousness of the conduct in question.'

Henry and Neill LJJ agreed. But it is clear from the report in the Re Sevenoaks Stationers (Retail) Ltd that Dillon LJ (with whom Butler-Sloss and Staughton LJJ agreed) was distinguishing between matters which (if admissible) would tend to increase the period of disqualification, and matters of mitigation. Dillon LJ's interlocutory question ([1991] Ch 164 at 170) must be read in the light of counsel's argument. That is clear from a passage in Dillon LJ's judgment ([1991] 3 All ER 578 at 584, [1991] Ch 164 at 177). When it comes to mitigation (and to applications under s 17) the court is not restricted to the facts of the offence.

(7) In Re Dawes & Henderson (Agencies) Ltd (in liq) [1997] 1 BCLC 329 at 340 Blackburne J said:

'Matters of mitigation [the phrase used by Dillon LJ in Re Sevenoaks Stationers (Retail) Ltd [1991] 3 All ER 578 at 331, [1991] Ch 164 at 177] refers to matters relevant to the conduct that has been established.'

That is no doubt so, but does not provide anything like a precise or exhaustive test. In Re Barings plc Sir Richard Scott V-C put it like this

'But once that conclusion has, on the evidence, been arrived at, and the question is what period of disqualification should be imposed, then the issue, subject to the minimum and maximum limits set by Parliament, is one for the discretion of the court. I do not for my part see how it can be said that the evidence relating to the general ability and conduct as a director of the individual in question is necessarily irrelevant to the exercise of this discretion. I do not believe that discretion can be put into a closet from which general evidence of the sort I have described is excluded. Of course, not all evidence of character would be relevant. It would not be relevant in the least whether the director was a good family man or whether he was kind to animals. But evidence of his general conduct in the discharge of the office of director goes to the question of extent to which the public needs protection against his acting in that office. It seems to me that evidence of that character is relevant to be taken into account by the court in exercising its discretion and cannot be excluded as being inadmissible.' So far as there is any substantial difference between Re Dawes & Henderson (Agencies) Ltd (in liq) and Re Barings plc (and it is probably little more than a difference in emphasis), it is the views expressed by the Sir Richard Scott V-C in Re Barings plc which should be followed. A wide variety of matters including the former director's age and state of health, the length of time he has been in jeopardy, whether he has admitted the offence, his general conduct before and after the offence, and the periods of disqualification of his co-directors that may have been ordered by other courts may be relevant and admissible in determining the appropriate period of disqualification. We disagree with the view (that any period of de facto disqualification is irrelevant) expressed by Chadwick J in Re Thorncliffe Finance Ltd, Secretary of State for Trade and Industry v Arif [1997] 1 BCLC 34 at 45. The same matters may be relevant to an application under s 17, together with particulars of the responsibilities which the disqualified director wishes to be allowed to assume.

(8) This court was referred to the decision of Nourse J in Re Civica Investments Ltd [1983] BCLC 456 at 457-458, in which he said:

'It might be thought that [the appropriate period of disqualification] is something which, like the passing of sentence in a criminal case, ought to be dealt with comparatively briefly and without elaborate reasoning. In general I think that that must be the correct approach. More important, as more of these cases come before the court, it is obviously undesirable for the judge to be taken through the facts of previous cases in order to guide him as to the course he should take in the particular case before him. No doubt in this, as in other areas, it is possible that there will emerge a broad and undefined system of tariffs for defaults of varying degrees of blame, but there must come a point when it is no longer either necessary or desirable to go through the facts of previous cases. For my part I think that that point has now been reached.'

That was one of the earliest cases under s 28 of the Companies Act 1976, under which disqualification was not mandatory and there was no minimum period. However Nourse J's approach should be adopted in all cases involving disqualification. Nourse J's expectation about 'a broad and undefined system of tariffs' has been fulfilled by the decision of this court in Re Sevenoaks Stationers (Retail) Ltd [1991] 3 All ER 578, [1991] Ch 164. Nourse J may not have foreseen how (with the advent of new and specialised law reports) large numbers of disqualification cases would continue to be the subject of detailed reports but their existence makes his remarks all the more important. The principles applicable to the court's jurisdiction under the Act are now reasonably clear. The application of those principles to the facts of the particular case is a matter for the trial judge. The citation of cases as to the period of disqualification will, in the great majority of cases, be unnecessary and inappropriate.

(9) We are concerned at the delay in the hearing of these cases. Sometimes delay is unavoidable because of pending criminal proceedings. Sometimes respondents obtain over-indulgent extensions of time for putting in their evidence. All such delays are deplorable, especially as there is no power to suspend a director on an interim basis, even in proceedings alleging serious misconduct. We feel that over-elaboration in the preparation and hearing of these cases and a technical approach as to what evidence is and is not admissible is contributing to delay. What is required and what the court should confine the parties to, is sufficient evidence to enable the court to adopt a broad brush approach. This should be regarded, especially in relation to the period of disqualification, as a jurisdiction which the court should exercise in a summary manner and the court should confine the parties to placing before it the material which is needed to enable it to exercise the jurisdiction in that way.'

[3] While the form can vary, the wording of the Order will follow the wording of section 1 of the Company Directors Disqualification Act 1986. Subsection 1(1) giving the wording for the disqualification itself; subsection 1(2) providing that, unless the Court otherwise order, the disqualification shall begin 21 days after the date of the order.

A typical order might read:

'(1) Pursuant to sections 1 and [x] of the Company Directors Disqualification Act 1986 as amended the Defendant [Mr/Mrs X]:

(a) shall not be a director of a company, act as a receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court, and

(b) shall not act as an insolvency practitioner

for a period of [x] years

(2) Pursuant to section 1(2) of the Company Directors Disqualification Act 1986 as amended the period of disqualification shall begin at the end of 21 days beginning with the date of this order.'

In R v Ward [2002] BCC 953 (R v Ward), the Court of Appeal said, at paragraph 27:

'trial judges or justices who may be called upon to exercise their powers of disqualification under s. 1...should make clear that their order under s. 1 applies to all the categories which are identified in s. 1 as amended.'

Building on this:

(1) in R v Cole [1998] BCC 87, the Crown Court judge had picked and chosen between paragraphs (a), (b), (c) and (d) in imposing a disqualification under section 1. The Court of Appeal held that section 1 envisaged only one disqualification, with a number of different consequences and not a number of different categories of disqualification. That is apparent from the judgment of McCowan LJ at p. 92B;

(2) the prohibition in the order cannot be limited to the holding of a directorship in a public company; it must be in relation to all companies. In R v Ward (a case relating to section 1 of the CDDA), the Court of Appeal said, at paragraph 30:

'...there is no jurisdiction to limit a disqualification order made under the 1986 Act, to the holding of the directorships in a public company. A disqualification order made under s. 1 must apply to the holding of directorships in any company.'

In R v Goodman [1993] 2 All ER 789, Staughton LJ (giving the judgment of the Court) said, at 793:

'We, for our part, cannot see anything in the 1986 Act which enables a judge to make a disqualification order in relation to one class of company, that is to say those whose shares are publicly traded, but not in relation to another class of company....[counsel for Mr Goodman] is unable to point to a section in the 1986 Act which would enable us to make a general exception of the kind suggested by him, even if we were minded to do so.

In R. v Bramley [2004] EWCA Crim 3319, the Court of Appeal (Criminal Division) heard a (successful) appeal against a Crown Court judge purporting to impose a disqualification order upon a defendant, such order excluding from its scope, 4 named companies. As the Crown Court had no winding-up jurisdiction, the exclusions could not be characterised as elements of section 17 leave being granted at the same time as the disqualification. The Court of Appeal said, at paragraph 17, prosecuting counsel should have '...advised the judge that his powers were “all or nothing” so far as qualification was concerned...'

(3) Where an order is made under s. 1 of CDDA which is defective, in that it omits some of the matters in s. 1(1)(a)–(d), it nevertheless remains a valid order, capable of rectification under the slip rule. But such a defective order is, in any event, an effective disqualification order. In Official Receiver v Hannan [1997] BCC 644, a section 6 disqualification case, Morritt LJ said, 652–653:

‘…once the judge had concluded that Mr Hannan was unfit to be concerned in the management of a company he was obliged by statute to impose a disqualification order as defined in s. 1(1). Thus that result must, in law, be treated as his intention. If, contrary to my conclusion on the first point, his order did not achieve that result because of the omission of the other two capacities then that omission must be treated as accidental and may be corrected under [RSC] O. 20, r. 11. Alternatively if, as I have held on the first point, the incomplete order is nonetheless a disqualification order there is still an accidental omission, for the intention to be ascribed to the judge must be to achieve a disqualification order which is both valid and complete.’ (See R v Ward [2002] BCC 953, paragraph 20 onwards)

[4] In Lee, Applicant 2019 S.L.T. (Sh Ct) 307 (2019), a Scottish case in Sheriffdom of Lothian and Borders at Edinburgh, Sheriff P J Braid noted, at paragraph 7:

'...it is not possible to give an undertaking subject to exceptions. If a person wishes, at the time of being made subject to a disqualification order, or giving an undertaking to continue to act as a director for one or more companies, it is necessary to seek the leave of the court under s.17 at the same time as, or after, the order is made or the undertaking given. There is therefore no inherent incompatibility between the undertaking having been given, and the present application.'

[5] Section 11 of the Company Directors Disqualification Act 1986 is entitled 'Undischarged bankrupts' - a rather incomplete title - and subsections (1) and (2) read:

'(1) It is an offence for a person to act as director of a company or directly or indirectly to take part in or be concerned in the promotion, formation or management of a company, without the leave of the court, at a time when any of the circumstances mentioned in subsection (2) apply to the person.

(2) The circumstances are–

(a) the person is an undischarged bankrupt–

(i) in England and Wales or Scotland, or

(ii) in Northern Ireland,

(b) a bankruptcy restrictions order or undertaking is in force in respect of the person under–

(i) the Bankruptcy (Scotland) Act 1985 or 2016 or the Insolvency Act 1986, or

(ii) the Insolvency (Northern Ireland) Order 1989,

(c) a debt relief restrictions order or undertaking is in force in respect of the person under–

(i) the Insolvency Act 1986, or

(ii) the Insolvency (Northern Ireland) Order 1989,

(d) a moratorium period under a debt relief order applies in relation to the person under–

(i) the Insolvency Act 1986, or

(ii) the Insolvency (Northern Ireland) Order 1989.'

Also of particular note, is subsection (3), which reads:

'In England and Wales, the leave of the court shall not be given unless notice of intention to apply for it has been served on the official receiver; and it is the latter’s duty, if he is of opinion that it is contrary to the public interest that the application should be granted, to attend on the hearing of the application and oppose it.'

[6] The prohibitions will be set out in the disqualification instrument. For Court orders, see Footnote 3 above, for an example of a typical order.

The main statutory prohibitions themselves can be found:

(1) for disqualification orders - within section 1; and

(2) for disqualification undertakings - within section 1A(a);

(3) for undischarged bankrupt, or other section 11(2) circumstance existing - section 11(1)

(4) for competition disqualification orders, being a subset of disqualifications orders (section 9A(1)), within section 1;

(5) for competition disqualification undertakings - within section 9B(3);

By way example, section 1 of the Company Directors Disqualification Act 1986 is entitled ‘Disqualification orders: general’ and subsection 1 set out the disqualification order:

‘(1) In the circumstances specified below in this Act a court may, and under sections 6 and 9A shall, make against a person a disqualification order, that is to say an order that for a period specified in the order

(a) he shall not be a director of a company, act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court, and

(b) he shall not act as an insolvency practitioner.'

Section 1(2) of the Company Directors Disqualification Act 1986 sets out the maximum and minimum disqualification periods:

‘(2) In each section of this Act which gives to a court power or, as the case may be, imposes on it the duty to make a disqualification order there is specified the maximum (and, in sections 6 and 8ZA, the minimum) period of disqualification which may or (as the case may be) must be imposed by means of the order and, unless the court otherwise orders, the period of disqualification so imposed shall begin at the end of the period of 21 days beginning with the date of the order.’

Someone subject to this prohibition (without (if applicable) court permission to act), can colloquially be said to have been 'removed from the corporate arena'.

A few points in relation to violating the prohibitions:

(i) Seemingly, the offences, for violating, are strict liability; by analogy with R. v Brockley [1994] BCC 131, a undischarged bankrupt case, considering the Lord Scarman in Gammon (Hong Kong) Ltd & Ors v A-G of Hong Kong [1985] AC 1 distillation of the law, at 14B. In Mithani  - Directors Disqualification - Division VI - VI-12 (Issue 82) [4], the authors considered R. v Brockley was authority for this proposition.

(ii) the 'Defence of innocent intention' provided by section 352 of the Insolvency Act 1986 does not apply to CDDA offences. For completeness, section 352 reads:

'Where in the case of an offence under any provision of this Chapter it is stated that this section applies, a person is not guilty of the offence if he proves that, at the time of the conduct constituting the offence, he had no intent to defraud or to conceal the state of his affairs.'

As will be apparent, the key words limiting the scope of section 352's application, are 'under any provisoion of this Chapter' (which limits it to part of the Insolvency Act 1986) and 'it is stated that this section applies' (which limits it to sections that make express reference to section 352). None of which applies to CDDA offences.

(iii) the disqualified person can be disqualified again;

(iv) a confiscation order can be made against the disqualified person - R v Seager [2010] 1 WLR 815 and Hill v Department for Business, Innovation and Skills [2012] BCC 151

Milman helpfully summarised the position in an article (Co. L.N. 2013, 331, at 4), under a subheading 'Sanctions for breaching a disqualification' as:

'The sanctions are quite muscular.

Firstly, under CDDA 1986 s.13 a breach of a disqualification constitutes a crime. Any conviction will have the potential to engage the Proceeds of Crime Act 2002 and may lead to the recovery of profits earned from holding the illicit directorship during the period of contravention: R. v Seager [2009] EWCA Crim 1303; [2010] 1 W.L.R. 815; [2012] B.C.C. 124. However the court is required to assess the actual benefit obtained by the defendant and cannot simply base its calculations on the turnover or profits of the company in the period in question. This conclusion was followed in Hill v Department for Business, Information and Skills [2011] EWHC 3436 (Admin); [2012] B.C.C. 151.

The financial penalties do not end there. So under the CDDA 1986 s.15 there is the risk of personal liability for relevant corporate debts incurred during the period in which the disqualification was in force. In IRC v McEntaggart [2007] B.C.C. 260, where a bankrupt individual continued to act as a director, the court ruled that it was no excuse that a bankruptcy order was later annulled. The nature of liability under s.15, which is joint and several in nature, was further reviewed in Re Prestige Grindings Ltd [2005] EWHC 3076 (Ch); [2006] B.C.C. 421. Sanctions may also be imposed upon a third party for assisting another to contravene a disqualification by willingly acting as a director on the instructions of a disqualified person (s.15(1)(b)). By virtue of s.15(5) a person is presumed to act willingly unless the contrary is proved.

All disqualifications, whether effected by court order or via undertaking, should be listed in a public register established pursuant to s.18. The public are encouraged to blow the whistle on directors who flout a disqualification.'

[7] While the label 'section 17 leave' is used, for convenience, throughout this article, it is right to note leave is granted under the main relevant statutory provision. In Re Morija Plc [2007] EWHC 3055 (Ch), Sir Andrew Park said, at paragraph 41:

'...s.17 of CDDA contains provisions for the mechanics of the process when a court is asked to grant leave. If leave is granted it is, in my view, strictly given, not under s.17 , but under s.1(1)(a) if the disqualification arises by reason of an order or under s.1A(1)(a) if the disqualification arises by virtue of an undertaking.'

[8] The statutory basis for the disqualification dictates which Court any application for leave must be made to. Subsections 17(1) to (4) of the Company Directors Disqualification Act 1986, provide:

‘(1) Where a person is subject to a disqualification order made by a court having jurisdiction to wind up companies, any application for leave for the purposes of section 1(1)(a) shall be made to that court.

(2) Where

(a) a person is subject to a disqualification order made under section 2 by a court other than a court having jurisdiction to wind up companies, or

(b) a person is subject to a disqualification order made under section 5, any application for leave for the purposes of section 1(1)(a) shall be made to any court which, when the order was made, had jurisdiction to wind up the company (or, if there is more than one such company, any of the companies) to which the offence (or any of the offences) in question related.

(3) Where a person is subject to a disqualification undertaking accepted at any time under section 5A, 7 or 8, any application for leave for the purposes of section 1A(1) (a) shall be made to any court to which, if the Secretary of State had applied for a disqualification order under the section in question at that time, his application could have been made.

(3ZA) Where a person is subject to a disqualification undertaking accepted at any time under section 8ZC, any application for leave for the purposes of section 1A(1)(a) must be made to any court to which, if the Secretary of State had applied for a disqualification order under section 8ZA at that time, that application could have been made.

(3ZB) Where a person is subject to a disqualification undertaking accepted at any time under section 8ZE, any application for leave for the purposes of section 1A(1)(a) must be made to the High Court or, in Scotland, the Court of Session.

(3A) Where a person is subject to a disqualification undertaking accepted at any time under section 9B any application for leave for the purposes of section 9B(4) must be made to the High Court or (in Scotland) the Court of Session.

(4) But where a person is subject to two or more disqualification orders or undertakings (or to one or more disqualification orders and to one or more disqualification undertakings), any application for leave for the purposes of section 1(1)(a), 1A(1)(a) or 9B(4) shall be made to any court to which any such application relating to the latest order to be made, or undertaking to be accepted, could be made.’

[9] Various pieces of guidance as to the evidence expected with a section 17 leave application. For instance:

Peter Gibson LJ in Secretary of State for Trade and Industry v Collins [2000] BCC 998 said:

(1) 'The application for leave should be supported by clear evidence as to the precise role which the applicant would play in the company or companies in question and up-to-date and adequate information about that company or those companies.' (at 1010)

(2) '[the applicant] set out in his affidavit evidence in some detail his role in each of the companies in the Fairmont group. That role was not limited to purely accountancy-based work but he was required to be involved in the management of the various companies and he had a limited decision-making discretion. He also gave details of the financial position of each company.' (1009)

(3) 'No doubt the applicant will want to inform the court, if it be the case, that he has learnt his lesson,' (1009)

In terms of contents of the application, in Re Morija Plc [2007] EWHC 3055 (Ch), Sir Andrew Park heard an appeal, within which, the issue arose whether or not a disqualified person could be allowed to dispute the correctness of a particular fact that he had accepted by signing the disqualification undertaking. The fact being: when the disqualified person discovered someone in his business had committed a fraud on a bank. At first instance, the Registrar decided that the disqualified person could not do that, and Sir Andrew Park said, at paragraph 46 that '...he was absolutely right.', before explaining:

'[The disqualified person] was no more entitled on his leave application to reopen the issue of when he discovered about the letters of credit fraud than the Secretary of State would have been entitled to reopen the question of whether [the disqualified person] had known about the fraud all along, instead of only finding out about it after his return from holiday.'

Where the section 17 leave applicant has, impermissibly, attempted to adduce evidence to prove a fact contrary to the admissions with the directors disqualification undertaking, the relevance of this may be an issue. It maybe that the court takes the same view of such an attempt, as Sir Andrew Park did in Re Morija Plc [2007] EWHC 3055 (Ch). Sir Andrew Park said, at paragraph 55 '...I accept that that factor by itself ought not to have had any significant impact on whether leave should have been given.' At paragraph 48, he said:

'I agree that the Registrar was justified in being critical of [the disqualified person] for including it in his affidavits. But I cannot see that the fact that [the disqualified person] did attempt to adduce the evidence assists one way or the other on whether he did or did not appreciate the seriousness of his misconduct as a director of Morija, or on whether there would be a continuing risk to the public if he was given leave to continue as a director of [2 companies]. It could be that his legal advisers ought to have advised him that he should not seek to controvert any aspect of the admissions to which he had attached his signature in the disqualification undertaking. But if they did not (as seems possible...) I do not see that his application for leave is thereby rendered any weaker than it would have been if his affidavits had not raised the time of discovery issue. It is worth repeating that, in the skeleton argument of counsel for [the disqualified person] for the hearing before the Registrar, no reliance is placed on the issue in support of [the disqualified person]'s application to be granted leave.'

ICCJ Jones in Re Property Group (2010) Ltd; Competition and Markets Authority v Martin [2020] 2 BCLC 424 ('Property Group'), said, at paragraph 107(a):

'As to resources, an applicant for permission when addressing the policy of protection for the public must normally commit resources for the purposes of: (i) identifying the findings of fact which resulted in disqualification; (ii) satisfying the court (potentially but not necessarily by proposing safeguards) that the removal of public protection through permission will not place the public at risk; and (iii) convincing the court that the policies of deterrence and/or maintenance/improvement of standards will not be damaged, at least not to an extent justifying the refusal of permission.'

Later, ICCJ Jones in Property Group said, just after starting 'As mentioned at paragraph 107(a) above, those are precisely the types of factor addressed when deciding whether to grant leave' (paragraph 108(c)), at paragraph 108(b):

'For example, if the section 6 CDDA misconduct was wrongful trading, whether that company is financially sound, its existing management and practices and/or whether there are others who will ensure continued compliance with the norms of corporate governance. If the misconduct involved competition law, whether that company is also infringing or whether there are safeguards in place to ensure infringement will not occur.

[10] In Secretary of State for Trade and Industry v Collins [2000] B.C.C. 998; [2000] 2 BCLC 223, Peter Gibson LJ (with whom Judge LJ and Ferris J agreed) said, at 1010:

'In my opinion it is highly desirable that a person who faces the possibility of a disqualification order but who in the event of such an order wishes to seek leave should make that application early enough so that the same judge should consider both the application for disqualification and the application for leave (see Re Dicetrade Ltd [1994] BCC 371 at p. 373).'

And Judge LJ (with whom Ferris J agreed) said, at 1016:

'Justice is best served by simultaneous consideration of the disqualification order, and its length, and any appropriate relief from its full consequences...Sensible case management arrangements should ensure that [the judge's] views will be known to the parties and the substantive hearing prepared accordingly.'

The stages are, of course, separate: determining the issue of disqualification first, then determining the issue of whether or not to grant section 17 leave. The fact that section 17 leave might be granted, is irrelevant in relation to setting the length of the disqualification - see Re Westmid Packing Services Ltd (also known as Secretary of State for Trade and Industry v Griffiths) [1998] 2 All ER 124, at 131, paragraph (2) - quoted elsewhere in this article.

Explaining his approach, Judge LJ said, at 1015:

'An application for leave to mitigate the normal consequences of a disqualification order was contemplated before and during the period leading up to the hearing of the disqualification proceedings. Therefore questions of disqualification and leave should have been heard and decided together at a single hearing by the same judge. Although some applicants may hope to derive a tactical advantage from isolating the case for disqualification (which will inevitably highlight their misconduct) from their application for leave (which will tend to focus on the mitigation) the interests of justice overall are more likely to be served if both aspects of the case are investigated together. In any event separate proceedings also involve duplication and wasted resources.

In future, faced with an application for leave which was plainly in contemplation at the time of the disqualification proceedings, the judge should closely examine the explanations which purport to justify a second hearing. Quite apart from any consequential order for costs, unless satisfied that the delay arose for genuine reasons, and that a single hearing was truly impractical, he would be entitled to approach the evidence in support of the application for leave with a proper degree of healthy scepticism. Ultimately, of course, the responsibility for the eventual decision depends on his analysis of all the relevant facts of an individual case.

Assuming that separate proceedings are justifiably brought, and equally where the application for leave is made in the light of developments after the disqualification order has taken effect, the parties should not be permitted to relitigate the factual issues which led to the disqualification. In brief, the leave application is not and should not be treated as a rehearing, and certainly not as an appeal from the disqualification order. Second guessing the facts which gave rise to the Carecraft statement, or the judgment following disputed facts, is impermissible.

...

Where the application for leave arises at a later stage the facts agreed in the Carecraft statement, or where any facts were disputed, the court's judgment, should not be open to further investigation, save to the extent that the judge conducting the leave application personally requires it for the purposes of amplification or clarification. Sensible case management arrangements should ensure that his views will be known to the parties and the substantive hearing prepared accordingly.'

See also Secretary of State for Trade and Industry v Worth [1994] 2 BCLC 113

[11] In Falodun v Secretary of State for Business, Energy and Industrial Strategy [2023] EWHC 182 (Ch), ICC Judge Jones gave:

(1) a summary of the legal position, when he said at paragraph 5:

'Although the law will be referred to in more detail below, it is self-evident that an applicant asking for permission to act will need to present evidence to satisfy the court that the past misconduct will not repeat itself. Whilst each case turns on its own facts, that will usually require an explanation for the misconduct, repentance with understanding of what is needed to ensure such conduct does not reoccur, and also evidence to satisfy the court that the purposes of the disqualification undertaking/order will not be undermined by the grant of permission. Those purposes being the protection of the public and deterrence in regard to both the disqualified applicant and others who are or may become directors.'

(2) a more detailed analysis of the law, under the subheading 'The Law', from paragraphs 33 to 35, where he said:

'33. Guidance to the court’s approach to applications for permission pursuant to section 17 of the CDDA was set out by Miles J in Rwamba v Secretary of State for Business, Energy, and Industrial Strategy [2020] EWHC 2778 (Ch), [2021] BCC 184 at [34] as follows:

“i) The court has a discretion under section 17 to allow a person who has been disqualified to be a director of a company or be concerned or take part in the promotion, formation, or management of a company.

ii) The onus is on an applicant under the section to persuade the court to grant permission. The starting point when approaching the jurisdiction is that the applicant has been held unfit to be a director for the period of the order (or has accepted the equivalent when giving an undertaking). Nonetheless leave may be given in a proper case.

iii) It is for the court (and not for the Secretary of State) to be satisfied that it is appropriate to give leave for the applicant to be a director etc.

iv) The discretion under section 17 to give leave is unfettered. It is wrong to seek to add glosses or preconditions. The question for the court is whether in all the circumstances it is appropriate to give leave; and in approaching this question the court balances all the relevant factors.

v) Though it is usual to establish that the Company has a ‘need’ for the applicant to be a director or involved in the management, this is not a precondition. For instance, the appointment may be made to allow the director to obtain a tax advantage.

vi) The court should, among other things, have regard to the nature and seriousness of the conduct that led to the disqualification order or undertaking and the length of the disqualification. Where that conduct was dishonest a court may be reluctant to give leave.

vii) The court should, when deciding whether to give leave for a director to act as a director have regard to the purposes of a disqualification order. These include (i) protecting the public directly by prohibiting the disqualified person from acting and (ii) deterring both the particular director and others from the kind of conduct that has led to the order.

viii) Leave should not be too freely given as this would tend to undermine the protective and deterrent purposes of a disqualification order. The court would not wish anyone dealing with a director to be misled as to the gravity of a disqualification order.

ix) On the other hand, the power of the court to grant leave under section 17 is inherent in the disqualification regime and in an appropriate case it may serve the public interest to allow a disqualified person to be a director of a specific company.

x) Moreover, the fact that the applicant for leave has agreed to the imposition of conditions designed to ensure high standards of corporate conduct may itself be seen as promoting the policy of deterring misconduct.”

34. The emphasis upon “need” in case law does not arise from any statutory reference to that requirement. Its application led to some confusion in early case law but the position was made clear by Sir Richard Scott to the effect that the broad width of the court’s discretion when deciding whether to grant permission means that all facts and matters relevant to the circumstances of the particular situation should be taken into consideration (see Re Dawes & Henderson (Agencies) Ltd (No 2) [1999] 2 BCLC 317 in particular at 326.

35. I also refer to the following paragraphs by the editors of “Mithani, Directors’ Disqualification” within Chapter 4 of Division VI:

“On one side of the scales is the right of the applicant to seek release from the restraints of disqualification and on the other side is the need to ensure that the public is protected from his past misconduct and that the reasons for, and purposes of, his disqualification are not undermined. As Sir Richard Scott said in Re Barings plc, Secretary of State for Trade and Industry v Baker (No 3) sub nom Re Barings plc (No 4), Secretary of State for Trade and Industry v Baker (No 4):

''It seems to me that the importance of protecting the public from the conduct that led to the disqualification order and the need that the applicant should be able to act as a director of a particular company must be kept in balance with one another. The court in considering whether or not to grant leave should, in particular, pay attention to the nature of the defects in company management that led to the disqualification order and ask itself whether, if leave were granted, a situation might arise in which there would be a risk of recurrence of those defects.''

The Vice-Chancellor reiterated the views which he had expressed in his earlier decision in Re Barings plc (no 4), commenting:

'I remain of the opinion expressed in that passage. In a case where no need has been demonstrated on the company's part to have the applicant as its director or, from a business point of view, on the applicant's part to be a director, there would need, I think, to be only a very small risk to the public which the granting of the leave might produce to justify the refusal of the application. Per contra, if a substantial and pressing need on the part of the company, or on the part of the individual in order to be able to earn his living, could be shown in favour of the grant of leave then it might be right to accept some slight risk to the public if the leave sought were granted.'

This approach ensures that the purpose of disqualification is focussed primarily towards the protection of the public from the past misconduct of the applicant, rather than to penalise the applicant. It means that the court must look at the past, consider what is being proposed by the application and what risks might arise in the future if permission is granted.”

(3) his decision, from paragraph 49 onwards. At the start of his decision, ICC Judge Jones said, at paragraphs 49-50:

'...the Secretary of State has had the opportunity to consider and respond to the evidence in support by filing evidence in answer and/or by appearing through counsel at the hearings. Nevertheless, the application is made without the Secretary of State being bound to carry out investigations, and it would be impractical to expect such a course to be taken to any extensive degree. In those circumstances, and bearing in mind that personal knowledge of much of the information will be restricted to the applicant and their witnesses, and the fact that dispensation is being sought: the application is to be made in good faith and with disclosure of matters material to the grant of permission. The court is considering the need to protect the public and the need to promote the policy of deterrence. This requires candour, including the disclosure of material adverse to the application.

That duty has not been fulfilled in this case.'

After discussing the evidence, the judge dismissed the application on the facts (though the judge left open the possibility of a new application, in light of what he said in his judgment).

[12] Interestingly, a similar approach is taken in respect to section 216(3) of the Insolvency Act 1986 ('Restriction on re-use of company names') leave. In Re Lightning Electrical Contractors Ltd [1996] BCC 950, E W Hamilton QC (sitting as a deputy judge of the Chancery Division) heard a section 216(3) application for leave to act as a director of a number of companies (or directly or indirectly, be concerned or take part in the promotion, formation or management of the companies), each having a similar name to a company (which the applicant was a director of) now in insolvent liquidation. The deputy judge granted leave in respect to one particular company, and then turned to the second part of the application, namely, for leave in respect to 5 dormant companies. At 956, the deputy judge said: '...in my judgment, in applying s. 216 the court is concerned with ensuring that there is no abuse of the phoenix variety, and in the absence of any suggestion of a misuse of the name or assets of the old company I see no reason why permission should not be granted under s. 216 in respect of dormant companies, provided that they are specified and that there is not simply a blanket permission to use the prohibited name in respect of any company to be formed in the future.'

[13] To add to this, the Deputy High Court Judge in Sherling also said, at paragraphs 25 and 27:

'...whilst there are a number of corporate entities within the trading group, the reality is that they represent, to use the claimant's words, a single "end to end business" such that in respect of the seven trading companies for which both claimants seek leave, it would be extremely difficult to seek to compartmentalise their business activities in a way in which a de jure director of only one or some of them would not also be inadvertently acting as a de facto director of another.

...

...there is a need for both the claimants to be involved in the management of these companies and therefore, because of the difficulties of compartmentalisation referred to above, that means that they should be directors of these companies.'

[14a] In Lee, Applicant 2019 S.L.T. (Sh Ct) 307 (2019), a Scottish case in Sheriffdom of Lothian and Borders at Edinburgh, Sheriff P J Braid noted, at paragraph 1, that the original section 17 leave application had been in respect to 13 companies, '...but, during the course of proceedings, that has been whittled down to the following six companies...'

Later, Sheriff P J Braid said, at paragraph 23:

'As counsel conceded, this is a relatively unusual application in as much as leave is sought in respect of six companies. At first sight, it would drive a coach and four through any disqualification (or undertaking) were wholesale leave to be granted to enable the subject of a disqualification or the giver of an undertaking to continue to act as director of a large number of companies. Nonetheless, as counsel submitted, the 1986 Act makes clear that any disqualification operates merely so as to prevent a person from acting as a director without leave and there is no option, when an order is made or an undertaking given, to exclude one or more companies from that order or undertaking. The only means by which a person may continue to act as a director is to seek leave of the court, and for leave to be granted.'

[14b] In Re Morija PLC (also known as Secretary of State for Business, Enterprise and Regulatory Reform v Kluk) [2007] EWHC 3055 (Ch)('Re Morija'), Sir Andrew Park, at paragraph 33-35, provided 'some broad principles [which] have emerged from cases over the years':

'The purpose of a disqualification order or undertaking is not to punish the director for his misconduct. Rather it is to protect the public. Partly it does that by restricting the ability of the person concerned to expose the public to the risk of loss from further misconduct on his part. It is worth adding that the possible further misconduct does not have to be of the same nature as that which has led to the disqualification… Partly a disqualification order or undertaking achieves its purpose of protecting the public by deterring other directors from misconduct which might lead to disqualification proceedings against them. It also seems to me that the existence of the disqualification jurisdiction can have a beneficial effect in the form of maintaining and improving standards of integrity on the part of businessmen who become directors of companies.

Where a leave application is made the court has a balancing process to undertake. In favour of a grant of leave is the ‘need’ criterion: the need of the disqualified director to earn a living, and (a different matter, and usually more important) the need of some other person, typically another company, to have his services. Against the grant of leave may be the factors which I mentioned in the foregoing paragraph as purposes which the legislation is intended to serve: protecting the public by, to use a familiar metaphor drawn from another kind of disqualification, keeping off the road a person whose past conduct has fallen short of the standards to be expected; deterring other directors from similar misconduct; and maintaining and improving standards of integrity.

In the balancing process the degree of seriousness of the misconduct on the part of the disqualified person who is applying for leave is relevant. The relevance seems to me not to rest on the notion that, if a person’s misconduct has been serious enough, a refusal of leave serves him right. Rather the point is in part that, in the case of a person who has misconducted himself seriously in the past, the risk to the public of him misconducting himself again if he is granted leave is greater than would exist in the case of a person whose misconduct was less serious. A different aspect of the same point is that, if a disqualified director whose conduct has been significantly bad is seen by others to have been granted leave by the court to continue as a director of another company, the deterrent effect on other directors will be weakened'.

In Re NRLB Ltd (also known as Re v None) [2024] EWHC 206 (Ch), ICC Judge Prentis, at paragraph 33, quoted the above.

[15a] An extended quote from Sir Richard Scott VC in Dawes & Henderson (Agencies) Ltd (In Liquidation) (No.2), Re Shuttleworth v Secretary of State for Trade and Industry [2000] BCC 204; [1999] 2 BCLC 317, from 211, is:

It is, I think, plain that Rattee J in Secretary of State v Barnett was not limiting the factors to be taken into account so as to exclude some personal, non-commercial purpose of the applicant. In my respectful opinion he was right in expressing the question as he did in the passage I have cited. The discretion given to the court under the 1986 Act to grant leave to an individual against whom a disqualification order has been made, enabling him during the currency of the disqualification order to act as a director of a particular company, is a discretion unfettered by any statutory condition or criterion. It would in my view be wrong for the court to create any such fetters or conditions. The reason why it would be wrong is that no-one, when sitting in a particular case to give judgment, can foresee the infinite variety of circumstances that might apply in future cases not before the court. Where Parliament has given the courts an unfettered discretion I do not think it is for the courts to reduce the ambit of that discretion. But in exercising the statutory discretion courts must, of course, not take into account any irrelevant factors. The emphasis given in a judgment in a particular case on particular circumstances in that case is not necessarily a guide to the weight to be attributed to similar circumstances in a different case. Anything I say in this case about the circumstances that seem to me of weight in this case must be read subject to that warning.'

See the next footnote for a summary of the authorities from which the Rwamba guidance was drawn from.

[15b] In Rwamba v Secretary of State for Business, Energy and Industrial Strategy [2021] BCC 184, the authorities referred to Miles J, and from which he drew the general guidance set out in paragraph 34 of his judgment, included:

‘Re Tech Textiles Ltd [1998] 1 B.C.L.C. 259 ; Re Dawes & Henderson (Agencies) Ltd (in liq.) (No.2) [2000] B.C.C. 204 ; Re TTL Realisations Ltd [2000] 2 BCLC 223 ; Secretary of State for Trade and Industry v Baker ; Re Barings Plc [2000] 1 W.L.R. 634; [1999] B.C.C. 960 ; Re Morija Plc [2007] EWHC 3055 (Ch) ; Haughey v Secretary of State for Business, Energy and Industrial Strategy [2018] EWHC 3566 (Ch); [2019] B.C.C. 483.’

Whether the following was what Miles J in Rwamba use to formulate his general guidance, is unknown, but here are some illuminating extracts from the authorities:

[1] In Re Tech Textiles Ltd [1998] 1 BCLC 259, at 267e, Arden J said:

‘Leave … in my view is not to be too freely given. Legislative policy requires the disqualification of unfit directors to minimise the risk of harm to the public, and the courts must not by granting leave prevent the achievement of this policy objective. Nor would the court wish anyone dealing with the director to be misled as to the gravity with which it views the order that has been made.’

Under the heading of ‘Protection of the public’, the judge said this (at p. 268a–d):

‘The public for this purpose includes all relevant interest groups, such as shareholders, employees, lenders, customers and other creditors. The process of considering whether the public is adequately protected if leave is given involves considering a number of factors. The court must look at the grounds on which unfitness was found, and in particular whether the applicant had misappropriated any assets or acted knowingly in breach of duty. The court must also have regard to the view that the court took as to the character of the applicant, in particular his honesty, reliability and willingness to accept advice. The previous career of the applicant may also be relevant. Obviously it would also be relevant if the applicant had had a previous disqualification order made against him but that has not been suggested in this case.

As regards the company of which the applicant is to become a director, the court must consider the nature of the company's business, the size of the company, its financial position, the number of directors, the number of its employees and creditors and so on, and the risks involved in the company's particular business so far as it can make any assessment of this. It must also look to see whether there is a potential for the matters which were held to constitute unfitness to recur.’

Later, Arden J went on to say (at p. 268g) that in Re Gibson Davies 1995] BCC 11 (a decision of Sir Mervyn Davies) and other cases:

‘extensive safeguards were offered, in particular, to ensure that the applicant would not be the sole signatory on cheques or financial agreements, to subordinate directors' loans, to prevent security being granted over the company's assets to the applicant, to limit the applicant's emoluments, to procure compliance with filing requirements, to institute specified accounting controls, to prepare monthly management accounts and to submit them to the auditors, and to instruct the company's auditors to report in writing to the directors on any matter of concern relating to management or financial control of the company and in default of prompt and appropriate action by the directors, to bring the matter for the attention of the Secretary of State's solicitors.’

She also said this (at p. 269a):

‘There are also other matters which the court should in my view have regard. However, this is not in any way a comprehensive list. For instance the court should take into account the director's conduct since the matters which gave rise to the established grounds occurred, in particular since the proceedings for disqualification were begun. Thus if he has acted as a director while the proceedings were pending it will be relevant to see whether the companies had carried on business satisfactorily, for instance whether they are trading profitably, have complied with their obligations under the Companies Acts or other relevant legislation (such as fiscal legislation) and have paid liabilities as they fall due.’

Further, under the heading 'Need for the applicant to be a director', Arden J said, at p. 269c:

‘In this context, “need” has to be interpreted as a practical need. There will be companies where the involvement of the applicant and the capacity sought is vital to customer or investor confidence, or for some other sufficient reason.’

(these passages were referred to, with apparent approval, by Neuberger J in Re Verby Print for Advertising Ltd [1998] BCC 652 [1998] 2 BCLC 23, at 669-671)

[2] In Secretary of State for Trade and Industry v Baker; Re Barings Plc [2000] 1 W.L.R. 634; [1999] B.C.C. 960, Sir Richard Scott VC said, at 637:

'...section 17 leave should not be granted in circumstances in which the effect of its grant would be to undermine the purpose of the disqualification order. As a general principle, and apart from any authority, I think that must be right. The improprieties which have led to and required the making of a disqualification order must be kept clearly in mind when considering whether a grant of section 17 leave should be made.

If the conduct of a director has been tainted by any dishonesty, if the company in question has been allowed to continue trading while obviously hopelessly insolvent, if a director has been withdrawing from a struggling company excessive amounts by way of remuneration in anticipation of the company's collapse and, in effect, living off the company's creditors, and if a disqualification order were then made, these circumstances would loom very large on any section 17 application. The court would, I am sure, have in mind the need to protect the public from any repetition of the conduct in question. That conduct, and the protection of the public from it, would have been the major factor requiring the imposition of the disqualification.'

In the event, Sir Richard Scott VC said the case before him was not of that character (at 637) - it was '...not a case in which the disqualification order was made necessary by a need to keep Mr. Norris out of the boardroom in order to protect the public from dishonesty or impropriety.' (at 637)

On the issue of whether 'need' (whether the named company's need for the applicant's services, or the applicant's need to work in the Company's management) is essential to the success of any section 17 leave application, Sir Richard Scott VC said, at 640:

'If [the disqualified person] were not to be granted the section 17 leave that he seeks, he would have to relinquish his directorships of [2 named companies] but would remain available, in his consultancy business, to be instructed to give advice on any issue or issues on which his advice was desired. There is no reason to suppose that [the disqualified person] will not be able to make a success of his consultancy business. The talents and expertise that [directors of the 2 named companies] plainly admire would continue to be available to the public whether or not [the disqualified person] obtains the section 17 leave he is seeking. It seems clear, therefore, first, that [the disqualified person] does not need section 17 leave in order to continue earning his living and, second, that [2 named companies] do not need to have [the disqualified person] as a member of their respective boards in order to continue to be able to have the benefit of his advice on their respective management problems.

Is that a sufficient reason why section 17 leave should be withheld? In my judgment, it is not. If [the disqualified person's] advice on management and related issues is wanted by these companies, and it obviously is, and if putting him on the board in a nonexecutive role is the most sensible way of making sure that that advice is easily obtainable, and [directors of the 2 named companies] have formed the opinion that it is, what public interest requires that leave be withheld? The protection of the public does not require it. It might do in some cases, but not in this.'

On a more general level, Richard Scott VC said, at 640-641:

'The starting point in this application, as in all section 17 applications for leave, is that the applicant has been disqualified and that the period of disqualification is still current. The reasons for granting leave, if leave is to be granted, must be consistent with the reasons why the disqualification was imposed in the first place. In In re Tech Textiles Ltd. [1998] 1 B.C.L.C. 259, Arden J. said at p. 267:

“As respects the exercise of the discretion to grant leave there is no express guidance in the statute. It is clearly relevant to the exercise of this discretion to consider the end which disqualification seeks to achieve and the reasons why that end is thought desirable.”

I respectfully agree. Arden J. went on to ask: “To what factors should the court have regard when it is considering the grant of leave?” She answered her question by saying:

“The courts have on many occasions made clear that they will have regard to two factors in particular: (1) the protection of the public; and (2) the need for the applicant to be a director.”

In In re Gibson Davies Ltd. [1995] B.C.C. 11 Sir Mervyn Davies said, at p. 14:

“On an application under section 17…the court must be satisfied that there is a need to make the order and, more importantly, that if the order is made the public will remain adequately protected.”

In In re Amaron Ltd. (unreported), 25 April 1997, Neuberger J. addressed the question of whether the applicant had established “need” and held he had not. This was a case in which the applicant had allowed the company to trade while insolvent and to retain money owed to creditors in order to fund continued trading. The need to ensure protection of the public from the management techniques of that character would, in my view, have made it virtually impossible for a section 17 application to have succeeded.

It seems to me that the importance of protecting the public from the conduct that led to the disqualification order and the need that the applicant should be able to act as director of a particular company must be kept in balance with one another. The court in considering whether or not to grant leave should, in particular, pay attention to the nature of the defects in company management that led to the disqualification order and ask itself whether, if leave were granted, a situation might arise in which there would be a risk of recurrence of those defects. In a case like the present there seems to me to be virtually no risk at all of such a recurrence.'

On the facts, the disqualified person would be taking up 2 non-executive directorships. So, Richard Scott VC concluded, '[i]n neither case does his directorship carry with it any executive responsibilities at all.' (at 641)

Later, he said, at 641:

'It is, of course, important that the seriousness of disqualification orders should be maintained. Section 17 leave should never be granted without careful consideration and I bear in mind that one of the purposes of disqualification orders is to promote “the parliamentary intention to improve managerial safeguards and standards for the long-term good of employees, creditors and investors…:” In re Grayan Building Services Ltd. [1995] Ch. 241, 257, per Henry L.J.'

On the facts, leave was granted for the disqualified person to be a director of 3 companies (1 was a subsidiary of the other) on 3 conditions:
(1) he remain a non-executive director;
(2) he does not enter into any contract of employment;
(3) his directorship remains unpaid.

[3] In Re Morija Plc [2007] EWHC 3055 (Ch), Sir Andrew Park said, under the subheading 'Leave applications: the principles to be followed', 'I will not say much in this part of my judgment, since the principles are well-established and not disputed on the appeal to me.' before summarising the law as follows, at paragraphs 32 to 35, and 37:

'It is accepted that there is no difference between applications for leave in cases where a disqualification order has been made under the CDDA s.1 and applications in cases where a disqualification undertaking has been given under s.1A. Sir Richard Scott V-C pointed out in re Dawes & Henderson Ltd [2000] BCC 204 at 211, that the statute puts no fetters on the discretion to grant leave and attaches no conditions. Nevertheless some broad principles have emerged from cases over the years.

The purpose of a disqualification order or undertaking is not to punish the director for his misconduct. Rather it is to protect the public. Partly it does that by restricting the ability of the person concerned to expose the public to the risk of loss from further misconduct on his part. It is worth adding that the possible further misconduct does not have to be of the same nature as that which has led to the disqualification: see observations of Lloyd J in the Stern case, re Westminster Property Management Ltd (No2) [2001] BCC 305 at 359 to 360. The observations were cited (appropriately so, in my judgment) by Registrar Jaques in the present case. Partly a disqualification order or undertaking achieves its purpose of protecting the public by deterring other directors from misconduct which might lead to disqualification proceedings against them. It also seems to me that the existence of the disqualification jurisdiction can have a beneficial effect in the form of maintaining and improving standards of integrity on the part of businessmen who become directors of companies.

Where a leave application is made the court has a balancing process to undertake. In favour of a grant of leave is the ‘need’ criterion: the need of the disqualified director to earn a living, and (a different matter, and usually more important) the need of some other person, typically another company, to have his services. Against the grant of leave may be the factors which I mentioned in the foregoing paragraph as purposes which the legislation is intended to serve: protecting the public by, to use a familiar metaphor drawn from another kind of disqualification, keeping off the road a person whose past conduct has fallen short of the standards to be expected; deterring other directors from similar misconduct; and maintaining and improving standards of integrity.

In the balancing process the degree of seriousness of the misconduct on the part of the disqualified person who is applying for leave is relevant. The relevance seems to me not to rest on the notion that, if a person's misconduct has been serious enough, a refusal of leave serves him right. Rather the point is in part that, in the case of a person who has misconducted himself seriously in the past, the risk to the public of him misconducting himself again if he is granted leave is greater than would exist in the case of a person whose misconduct was less serious. A different aspect of the same point is that, if a disqualified director whose conduct has been significantly bad is seen by others to have been granted leave by the court to continue as a director of another company, the deterrent effect on other directors will be weakened.

...

...the Registrar continued:

“On the basis of that assumption [that any need requirement was satisfied] I, therefore, proceed to consider the twin objectives of the disqualification regime, the protection of the public and the deterrent effect of a disqualification order or undertaking.”

I comment at this point that the Registrar correctly identified the principal factors which a court should evaluate when considering an application for leave: need, which is likely to point in one direction, and the protection of the public, which is likely to point in the other direction.

Though not a case Miles J expressly listed as one he had considered, it is noteworthy that:

(1) In Re Gibson Davies Ltd [1995] BCC 11, Sir Mervyn Davies said this at p. 14E–G:

‘On an application under s. 17 of the Company Directors Disqualification Act the court must be satisfied that there is a need to make the order and, more importantly, that if the order is made the public will be adequately protected. The concepts of need and protection have been referred to in the context of the Act. In Re Lo-Line Electric Motors Ltd (1988) 4 B.C.C. 415, Sir Nicolas Browne-Wilkinson V-C at p. 419, in reference to s. 300 of the Companies Act 1985 (the forerunner of s. 6 of the 1986 Act), says:

“The primary purpose of the section is not to punish the individual but to protect the public against the future conduct of companies by persons whose past records as directors of insolvent companies have shown them to be a danger to creditors and others. Therefore, the power is not fundamentally penal. But if the power to disqualify is exercised, disqualification does involve substantial interference with the freedom of the individual. It follows that the right of the individual must be fully protected.”’

Sir Mervyn Davies continued:

‘So there is to be protection of the public with a measure of protection for the rights of the individual. At p. 424 the Vice-Chancellor takes account of the “need” of the applicant in that case to take a managerial role.’

Sir Mervyn Davies also made reference to: (1) Re McQuillan (1989) 5 B.C.C. 137; and (2) Re Cargo Agency Ltd [1992] B.C.C. 388, where he said:

'In Re McQuillan (1989) 5 B.C.C. 137 Murray J in the Northern Ireland High Court was concerned with an application akin to an application under s. 11 of the 1986 Act, s. 11 being the section which debars a bankrupt from acting as a director without leave of the court. The judge said at p. 140H:

‘There appears to be no authority in the UK courts on the exercise of the discretion conferred on the court by art. 310 or the corresponding provision in force in Britain, viz. s. 11 of the Company Directors Disqualification Act 1986 but Mr Orr, for the company, helpfully referred me to a case in the Supreme Court of New South Wales, which has precisely the same discretion under its statute law: Re Altim Pty Ltd [1968] 2 NSWR 762, a decision of Street J given on 6 August 1968. The judge deals with the statutory discretion in these words (at p. 764):

“The section under which this application is made proceeds upon the basis that a person who is an undischarged bankrupt is prima facie not to be permitted to act as a director or to take part in the management of a company. The court is given jurisdiction to grant leave for such activities to be carried on, but an applicant who comes to the court seeking leave must bear the onus of establishing that the general policy of the legislature laid down in this section ought to be made the subject of an exception in his case. It should be borne in mind that the section is not in any sense a punishment of the bankrupt. Nor should a refusal to grant leave under that section be regarded as punitive. The prohibition is entirely protective, and the power of the court to grant leave is to be exercised with this consideration in the forefront.”’

So Street J emphasises the protective element of the jurisdiction.

Lastly, there is Re Cargo Agency Ltd [1992] B.C.C. 388, where Harman J says (at p. 393C):

‘It seems to me that Mr Newey must be right that applications for leave pursuant to s. 1 should only be granted where there is a need for them to be granted, and should only be granted upon evidence of adequate protection from danger.

The reference there to s. 1 will embrace s. 17 of the Act.'

(2) in Re Westminster Property Management Ltd (No.2) (also known as: Official Receiver v Stern (No.2) [2001] B.C.C. 305, Lloyds J said, at 364:

'It seems to me that there would be a substantial onus on [the disqualified person] in the circumstances of this case to demonstrate that he ought to be granted leave for reasons of substantial need on the part of the particular corporate entity and that there was a very sure system to make sure that the public is protected against any possibility of suffering from any possible misconduct on his part. I am not satisfied of any of those matters and accordingly I refuse [the disqualified person's] application.'

(3) in Lee, Applicant 2019 S.L.T. (Sh Ct) 307 (2019), a Scottish case in Sheriffdom of Lothian and Borders at Edinburgh, Sheriff P J Braid said, at paragraph 24:

'...in deciding whether to grant leave, the court has an unfettered discretion. Relevant in the exercise of that discretion are: the circumstances which led to the disqualification; the extent to which there is the need, be that of the person making the application, a company or employees, for the applicant to continue as director; and, last but not least the need to protect the public from a repetition of the conduct which led to the disqualification. The court must then carry out a balancing exercise.'

(4) In Re Verby Print for Advertising Ltd [1998] BCC 652 [1998] 2 BCLC 23, Neuberger J said, at 671:

'Once a person has been found to be unfit to be a director of the company, the legislature requires that he be disqualified. However much sympathy the court may have with a particular applicant for a s. 17 order, the court must not be seen to be an easy touch for applicants who wish to continue to be directors of companies other than the company in respect of which they have been disqualified. Otherwise there is a danger of the protection to the public afforded by the disqualification order granted with the one hand being effectively taken away with the other hand: the court is seen almost as a matter of course to be saying that a person cannot be a director of any companies except those companies in respect of which he wishes to be a director.

Therefore, even where there are a number of factors of a general nature favouring the applicant, as in this case, the court must approach any application under s. 17 with care.'

(5) in Penrose v Official Receiver [1996] 1 WLR 482, a section 216(3) Insolvency Act 1986 application for permission to re-use a name case, Chadwick J said, about section 17 leave applications, at 488 (Company Directors Disqualification Act 1986 is referred to as 'Disqualification Act'):

'Where a disqualification order has been made under the Disqualification Act the person disqualified may apply for leave to be a director of a company or to be concerned in its management, notwithstanding the order: see sections 1(1) and 17(1) of that Act. Section 17(2) provides that on the hearing of an application for leave made by a person against whom a disqualification order has been made on the application of the Secretary of State, the official receiver or the liquidator, the Secretary of State, official receiver or liquidator shall appear and call the attention of the court to any matters which seem to him to be relevant; compare section 216(5) of the Insolvency Act.

The position, therefore, is that, where the court has been satisfied that a person's conduct in relation to the affairs of an insolvent company makes him unfit to be concerned in the management of a company, the court must disqualify him, but may, none the less, give him leave to continue as a director in respect of a particular company. In deciding whether or not to give that leave, the court must have regard to - and, in practice, is likely to attach considerable weight to - any report made by the Secretary of State or official receiver under section 17(2) of the Disqualification Act.'

[16] In Re Property Group (2010) Ltd; Competition and Markets Authority v Martin [2020] 2 BCLC 424, ICCJ Jones in paragraphs 110(e) and (f) said:

'The aims of disqualification under sections 6 and 9A of the CDDA to justify its Article 8 restriction are: (i) to protect the public from misconduct, (ii) to provide a deterrence both specifically for the individual concerned and generally for all who act as directors and (iii) to maintain/improve the standards of corporate management.

It is established law that each is a legitimate aim capable of justifying the restriction a disqualification order imposes (see DC, HS and AD v United Kingdom [2000] BCC 710 at 717, or in WGS and MSLS v United Kingdom [2000] BCC 719 at 726). Subject to the issue of proportionality, the CDDA's use of a disqualification order to achieve those legitimate aims is lawful and necessary.'

[17a] In Re NRLB Ltd (also known as Re v None) [2024] EWHC 206 (Ch), ICC Judge Prentis said, at paragraphs 139 to 159, under the heading 'Deterrence and perception' (Mr Brown was the disqualified person/s.17 applicant):

'139. The CMA has provided detailed, and again unchallenged, evidence on this subject through Jessica Lynn Radke, a Senior Litigation Director. Ms Radke qualified as a solicitor in New York and Maine in 2001, and in England in 2005. She is the Senior Responsible Officer within the CMA for Competition Disqualification Order investigations, and has been involved in this case since the commencement of the investigation in March 2019.

140. “The CMA is an independent, non-ministerial, government department. It has a legal duty to promote competitive markets within the United Kingdom in the interests of consumers. As the UK’s principal competition authority, the CMA exercises a number of statutory powers for the purposes of enforcing competition law… Among these, it has powers of investigation and sanction under the Competition Act 1998. The essential purpose of the CA98 is to protect and promote competition”.

141. “Weaker competition harms the UK economy both at a microeconomic level, through harm to consumer and businesses (most commonly in the form of higher prices, lower quality, reduced innovation and barriers to entry), and at a macroeconomic level (through low productivity, inefficiency, lack of innovation and poor economic growth)”.

142. “Business cartel activity is the most serious type of competition law infringement; and includes price-fixing, market sharing and bid-rigging (including cover bidding). Although there is no defined hierarchy of seriousness, the CMA has often issued public statements indicating that it considers cartel activities… to be the most serious types of competition infringement”.

143. Cartel activity is “typically difficult to detect”, so investigation and enforcement is “highly resource intensive, with the cost borne by the taxpayer”. Investigation is often lengthy, as here: the investigation commenced in March 2019, the Decision being given in March 2023. The leniency policy is intended to incentivise self-reporting and co-operation with any investigation.

144. The “CMA’s primary means of sanctioning those involved in business cartel activity is to impose financial penalties on the firms”, which may be up to 10% of an undertaking’s turnover. These, though, are not in themselves sufficient: a “2014 study found that changes to EU competition law over the preceding decades had no effect on the price-setting behaviour of cartels. That same study found that ‘in 67% of the cases the gain from price fixing outweighs expected punishments’”.

145. “The overall deterrent effect of the competition enforcement regime is significantly enhanced if individuals understand that there are likely to be genuine personal consequences for them (beyond just financial consequences for the company) if their companies fail to comply with competition law. The reality is that individuals have significant power to control the market activity of their companies, and the possibility that they will personally suffer career and earning-potential limiting sanctions represents a powerful additional incentive to encourage individuals and firms to actively engender a corporate culture that is intolerant of wrongdoing”.

146. Since their introduction through the Enterprise Act 2002, “CDOs have… become an important additional tool in the CMA’s enforcement armoury, and have played a key role in demonstrating to individuals, businesses and the public the critical need for competition law compliance”. Their “effectiveness… as a general deterrent was highlighted in a report prepared by Deloitte for the OFT (the CMA’s predecessor) in 2007… Deloitte found that individual sanctions were more effective than fines in motivating compliance with competition law”.

147. Mr Brown’s undertaking is one of four accepted following this investigation. Mr Cluskey of Cantillon Limited, disqualified for 4 years and 6 months, has obtained limited permission to continue to act.

148. The CDO cases relating to the investigation have caused the CMA to expend “significant resources” since their notification to Mr Brown and the others in November 2019, estimated at over 2000 staff hours.

149. “In competition theory, firms make decisions to break the law… in the same way as they make any other business decision, ie by rationally weighing up the costs and benefits. The benefit is the extra profit that comes from joining a cartel, whereas the cost is the punishment discounted by the possibility of being caught. From an enforcement perspective, the CMA seeks to adopt policies that increase the cost of forming and operating a cartel, or by increasing the prospect of being caught or increasing the likely punishment if the cartel is discovered”.

150. “The CMA’s review of published studies on general deterrence suggests that the deterrent effect of competition law enforcement is significant. It is estimated that more active cartel enforcement deters cartels in a ratio of between 4.6:1 and 28:1, ie many more cartels are deterred for each one that is caught… It follows that any weakening of the general deterrent effect of the competition enforcement regime may lead to an increase in cartel activity, resulting in deleterious effects for consumers, businesses and the wider economy”.

151. “The CMA considers that any decision by the Court to grant an individual subject to a CDU or CDO leave to act naturally and inevitably undermines the general deterrent effect… [given] the public interest in maintaining the full force of its deterrent effect…”.

152. So the CMA “whilst fully accepting that the decision as to whether to grant leave is ultimately a matter for the Court... considers that leave should be granted only where an exceptional countervailing interest justifies it and, even then, such leave should be subject to appropriately stringent conditions which are tailored to the particular circumstances of the case to protect the public interest”.

153. That is not the legal test, but indicates the extent of its public interest concern and the strength of the case it suggests is necessary to overcome that.

154. This is powerful, rationalised, and unchallenged evidence. Both in theory and in practice the competition regime generates positive public benefit. More, that regime is reinforced and strengthened through individual sanction including disqualification; and put the other way, it is diluted by the granting of leave.

155. The CMA’s overarching submission is that permission to act in this case “would seriously undermine the general deterrent of the director disqualification regime in competition cases”. It “regards Mr Brown’s conduct as a paradigm example of cartel activity that is hard to detect, time consuming and costly to enforce, ostensibly very profitable for the undertakings involved and deleterious for the consumer and the wider economy”.

156. “Given the serious nature of Mr Brown’s conduct, the CMA believes that a grant of leave to act in the circumstances of this case would significantly, and potentially irreparably, undermine the general deterrent effect”.

157. Again, that is unchallenged evidence from the specialist public body.

158. The CMA also notes that it “has limited resources and must allocate them in accordance with its prioritisation principles”; a “significant resource allocation” has been made to this investigation; and “If the CMA considers that the general deterrent impact of the disqualification regime is hollowed out through the effect of successful applications for leave to act, there is a risk that it will be concluded that pursuing such cases in the future no longer justifies the resource allocation, as a matter of administrative prioritisation”.

159. Again, that is unchallenged.'

[17b] In Rwamba v Secretary of State for Business, Energy and Industrial Strategy [2021] BCC 184 (‘Rwamba’), Miles J said, at paragraph 6, ’The factual background to the application may be taken from the full and clear history found in the first judgment’, before quoting ICCJ Prentis’ first judgment, paragraphs 5 to 20 and 32 to 43 inclusive. The neutral citation for ICC Judge Prentis’ first judgment, handed down 17 October 2019, is [2019] EWHC 2669 (Ch).

Condensing the convoluted facts down, it might be summarised:

On about 17 November 2009, the applicant accepted (i.e. gave, in agreement with the SOS) a first disqualification undertaking (‘the 2009 Undertaking’), to last 4 years (to 17 November 2013) for, Miles J gleaned, causing a company (Eulink), between 2003 and 2007, to ‘…to make investments totalling £525,000 to the detriment of Her Majesty’s Revenue & Customs’ (paragraph 8).

On 30 November 2019, the applicant applied under section 17 for permission to remain a director of Match Options Limited (‘MOL1’). Seemingly, interim orders were granted before, on 18 June 2010, the applicant’s application for section 17 leave was granted, on 11 conditions (the ‘June 2010 Permission’).

Condition 6.2 was that the applicant ‘shall procure that [MOL1] … files returns due to HM Revenue and Customs on time, and makes payments due to HM Revenue and Customs in accordance with the schedule of repayment set out in the letter … to HM Revenue and Customs dated 14 January 2010 and makes all other payments due to HM Revenue and Customs on time’.

On 11 October 2012, MOL1 entered administration (paragraph 14), and liquidation on 10 April 2013.

The applicant accepted that he breached the June 2010 Permission.

On 22 October 2012, MOL1’s business and assets were sold to MOL2. But the applicant did not join MOL2 board of directors. Following the 2009 Undertaking lapsing on 17 November 2013, the applicant was director of MOFL (as it later become known as) from 23 December 2013 to 15 July 2014.

On 28 May 2015, the applicant was disqualified again, under the CDDA, pursuant to a disqualification undertaking (the ‘2015 Undertaking’). The period this time was 6 years. The applicant accepted/gave the 2015 Undertaking because he accepted that, from 7 August 2010, he had breached the terms of the June 2010 Permission ‘…and as a result acted as a director of [MOL1] whilst I knew or ought to have known that I was disqualified from doing so…’ (paragraph 20). His breaches related to procuring/ensuring that MOL1: (1) filed its VAT returns; (2) complied with 14 January 2010 letter schedule of payments; (3) paid its VAT and Corporation tax.

It was upon that background that the applicant applied for leave to act as director of: (1) MOL2 and (2) MOFL, until the expiry of the 2015 Undertaking (namely: 28 May 2021).

As an aside, in this basis for the disqualification undertaking, use of language of ‘knew or ought to have known’ seems to bring in an ingredient of mens rea into whether or not a person has acting as a company director whilst disqualified. However, this is hard to square with commentary in Sealy & Milman: Annotated Guide to the Insolvency Legislation 24th Ed. - 2021. In their commentary to section 1 of the Company Directors Disqualification Act 1986, the learned authors state:

‘The offence of acting as a director while disqualified under this section is probably an absolute offence, on analogy with the position of an undischarged bankrupt: there is no requirement of mens rea. See R. v Brockley [1994] B.C.C. 131, and the note to s.11 below; and compare R. v Cole, Lees & Birch [1998] B.C.C. 87 (a decision on IA 1986 s.216).’

[18] In Rwamba v Secretary of State for Business, Energy and Industrial Strategy, at first instance, ICCJ Prentis gave a first judgment ([2019] EWHC 2669 (Ch), wherein he was not persuaded to grant leave to act. However, rather than dismiss the (unopposed) application, ICCJ Prentis gave the applicant Mr Rwamba a further hearing and opportunity to persuade the Court.

Miles J records this, at paragraphs 4, 8, 15 and 16 of his judgment [2021] BCC 184, as:

‘The judge was not persuaded at the first hearing to give Mr Rwamba leave but gave him an opportunity to supplement his evidence and return for a continued hearing….
…
The first judgment was given on 17 October 2019….
…
The judge stated his conclusions.… He said the grounds for the application were, on the evidence, too fragile to ascribe them much cogency. To give leave would be to undermine the public protection policy within the Act. But, rather than dismissing the application at once, he gave Mr Rwamba the opportunity to pursue the application with further evidence.

Mr Rwamba took that opportunity…The second hearing took place in January 2020. The judge gave the second judgment on 25 February 2020.’

[19] In Re Morija PLC (also known as Secretary of State for Business, Enterprise and Regulatory Reform v Kluk) [2007] EWHC 3055 (Ch), Sir Andrew Park dismissed an appeal against a refusal to grant section 17 leave. In doing so, he said, at paragraph 54:

'What message about the disqualification regime would it convey to directors of similar companies if [the disqualified person] was given permission by the court to continue running (with two other directors, recently appointed from long term employees) the same sort of company, carrying on the same sort of business, as he had been running (with two other directors) before? The wrong message, I suggest. It would give the impression that the disqualification regime has no real teeth because, even in cases of serious misconduct, it is not difficult to obtain leave to continue to manage another company.'

[20] An example of a summary of the seriousness of the breaches leading to the disqualification, can be found in Shuttleworth v Secretary of State for Trade and Industry (Re Dawes and Henderson (Agencies) Ltd) [2000] BCC 204, where Sir Richard Scott V-C said, at 206:

'The emergence of these improprieties in the conduct of the company's affairs led to disqualification proceedings... It was not suggested in the agreed statement that was placed before the court as part of the Carecraft procedure that [the disqualified person]... had acted dishonestly or with any want of probity or had deliberately allowed the company to breach ... out of any desire for personal gain. In short, the improprieties alleged were of inadequate management and not of any dishonesty or want of probity.'

[21] In Re Fourfront Group Limited; Stamatis v CMA [2019] EWHC 3318 (Ch), a decision of Deputy ICC Judge Baister (as he by then was) said, at paragraph 19:

'The seriousness of the misconduct is another consideration… That is often expressed by reference to the bracket into which the disqualification period ordered or agreed to by undertaking falls, and in that sense is a convenient shorthand to adopt, but in fact it seems to me that it is the seriousness of the conduct to which attention must be paid rather than the period of disqualification per se.'

This was applied by ICCJ Jones in Re Property Group (2010) Ltd; Competition and Markets Authority v Martin [2020] 2 BCLC 424 at paragraph 112, and noted, without demur, by ICC Judge Prentis in Re NRLB Ltd (also known as Re v None) [2024] EWHC 206 (Ch) at paragraph 16, before ICC Judge Prentis said 'That is not to say that the length of disqualification is irrelevant.' Later, at paragraph 161, ICC Judge Prentis said 'as was said in Fourfront, the main consideration is not the period but the reasons for disqualification.'

[22] In Shuttleworth v Secretary of State for Trade and Industry (Re Dawes and Henderson (Agencies) Ltd) [2000] BCC 204 ('Shuttleworth'), Sir Richard Scott V-C said, at 209:

'This application cannot, in my judgment, be presented on the footing that the s. 17 leave is required in order to satisfy a business need on the part of [the named company]. Nor can it be presented on the footing that the leave is needed for some business or commercial purpose of [the disqualified person]. The purpose is simply to allow [the disqualified person] to obtain deferment of his liability to pay ... capital gains tax.'

Later, at 213, Shuttleworth said:

'[The disqualified person] has, in my view, a legitimate interest, to borrow the expression used by Rattee J, in deferring tax if the statutory provisions allow him to do it. That interest is a personal interest. It is not a business or commercial interest. It may not represent a ‘need’ in the sense in which ‘need’ has been used in some of the previous cases. But I decline to shackle the statutory discretion of the court on applications under s. 17 by the creation or recognition of pre-conditions not contained in the legislation.'

The reference to Rattee J's expression, is to Rattee J in Secretary of State for Trade and Industry v Barnett [1998] 2 BCLC 64, where at 72a, he said:

‘In my judgment, the question I should ask myself is whether it is necessary for [the disqualified person] to be a director of a company in order to protect some legitimate interest of [the disqualified person] himself, or of any third party, which it is in all the circumstances of the case reasonable that the court should seek to protect. If it is so necessary, then the next question is whether that need can be met without infringing the protection of the public secured by the disqualification order. The extent to which it may be reasonable for the court to seek to protect the interests of the applicant himself in such a case must depend on all the circumstances giving rise to his disqualification. So must the court's ability to continue to protect the public adequately while mitigating the full rigour of a disqualification order.’

[23] In Shuttleworth v Secretary of State for Trade and Industry (Re Dawes and Henderson (Agencies) Ltd) [2000] BCC 204, Sir Richard Scott V-C said, at 211-212:

'The next factor of importance...is that the company in question, of which the applicant wants to be allowed to be a director, is not a limited company. It has a share capital but the liability of its members is not limited to the amount outstanding on the shares they have taken up. As a sole trader [the disqualified person] is liable in respect of all the debts of the business. As the sole shareholder in an unlimited company carrying on that business he would retain the same liability, albeit that the procedure to enforce that liability would require a petition to have the company wound up. The liability of a member of a company without limited liability cannot be enforced short of a winding up.'

Later, Sir Richard Scott V-C said:

'‘‘[F]or my part I cannot see how the grant of leave to [the disqualified person] to be a director of a company with unlimited liability of which he is the only member can possibly undermine the importance and effect of the disqualification order that was made against him. It may well be arguable that a grant of leave to be a director of a limited company wholly owned by the individual in question would do that. Indeed, although this is not before me, if [the company] had been a limited company I think that this application would have been a very difficult one indeed for [the disqualified person] to have put forward.’ [bold added]

Crucial therefore is that, as the only member of an unlimited company, that disqualified person/applicant is and will be exposed, qua member, to unlimited liability for the company's debts. The risk of abuse of the limited liability privilege with limited companies, cannot exist with unlimited liability companies.

Is it a straightforward as that? No, it is not because there is some differences between a business operated with a personal estate (sole trader) and one operated within an unlimited company. Looking at what Sir Richard Scott V-C said in more detail, at 212-213:

'If this were a case in which there could be discerned no difference in substance between [the disqualified person] carrying on business in his own name and [the disqualified person] carrying on business through the medium of a company in which he owned all the shares and for whose debts he was, without limitation, liable, a refusal of leave to allow him to carry on business in the latter form would seem to me to elevate form above substance. The question whether leave should be granted must, in my opinion, depend on whether by granting leave something is going to be allowed to be done that would be different, significantly and substantially, from what can be done anyway.

So what is the difference that will follow if I grant [the disqualified person] the leave that he seeks? The difference will not be that, if the business is carried on by a company of which he is the shareholder and director, he will have some immunity from the debts of the business; he will not have that immunity. The difference seems to me to be simply that in order to obtain payment of their debts, if the company does not pay them, creditors would have to issue a petition for winding up and incur the expense, delay and inconvenience of that course before they could get into [the disqualified person's] wallet for the payment of what was due to them.

Does that difference justify or require that this s. 17 application be refused, or is there any other reason which should lead me to refuse the application? [Counsel for the Secretary of State] has rightly reminded me that the grant of leave must not undermine the purpose of disqualification orders. But for my part I cannot see how the grant of leave to [the disqualified person] to be a director of a company with unlimited liability of which he is the only member can possibly undermine the importance and effect of the disqualification order that was made against him. It may be well arguable that a grant of leave to be a director of a limited company wholly owned by the individual in question would do that. Indeed, although this is not before me, if [the named company] had been a limited company I think that this application would have been a very difficult one indeed for [the disqualified person] to have put forward. But the disadvantages of being under a disqualification order do not seem to me to be undermined by leave to be a director of a company with unlimited liability in which the director holds all the shares.

So I come back to the slight differences, and differences there certainly are, between the situation if I grant leave and [the disqualified person] becomes a director of [the named company] and [the named company] carries on the business and the position as it is at the moment. In both cases [the disqualified person] will be the manager of the business. In both he will be liable ultimately for all the debts of the business. But, with the company carrying on the business his liability cannot be brought home without winding-up proceedings.

In addition, with the company carrying on the business and with [the disqualified person] as the leading, if not the sole director (I do not know whether it is intended that his wife remain a director), he will come under the obligations to comply with the requirements of the Companies Act 1985 that all directors must comply with. They do not apply to him at the moment because he is carrying on the business in his own name. He will come under the obligations, for example, to see that there are no breaches of s. 151 and to see that there are no preferences given to creditors.

If this had been a case where circumstances leading to the making of the disqualification order had included any element of lack of probity, it might very well have been right to have hesitated a long time before putting [the disqualified person] once more in a position to commit breaches of duties owed under the Companies Act, duties he will owe if he becomes a director but does not owe at the moment. But in the absence of any improprieties of that sort, particularly bearing in mind that following the liquidation of Dawes and Henderson (Agencies) Ltd all the creditors of that company were paid in full, I do not think that an order placing [the disqualified person] once more in a position of owing those Companies Act duties and responsibilities is one which carries any significant danger to the public at all.'

So it is still important: (1) the seriousness of past misconduct; and (2) wisdom of providing an opportunity for further Companies Act 2006 (as is the now applicable companies act) breaches to occur.

On the facts of Shuttleworth, the absence of weighty protection of the public issues, meant the absence of a pressing need, was not decisive/fatal. Sir Richard Scott V-C said, at 213:

'The weight of the factors relied on by [the disqualified person] in favour of making the order do not seem to me to be particularly heavy. The only factor is his interest in obtaining the tax deferral. But I can see really nothing of any weight at all to put into the other side of the scale and in those circumstances the balance seems to me to come down in favour of the grant of leave.'

Conditions were imposed however on the section 17 leave, at 213:

(1) '[the disqualified person] will remain the 100 per cent owner of all the shares in [the named company]';

(2) '[the named company] will not convert to being a limited liability company and will have no subsidiary which is a limited liability company'; and

(3) Conditions that the disqualified person was to '...take and to follow advice in the event of any transaction being proposed which might possibly run foul of s. 151 or the provisions of the Companies Act relating to preference'

[24] In Re TLL Realisations [2000] B.C.C. 998; [2000] 2 BCLC 223 (also known as Secretary of State for Trade and Industry v Collins), Ferris J agreed with Peter Gibson LJ and Judge LJ that the appeal should be dismissed, but sounded a very different note about the granting of section 17 leave with conditions. His comments do not form the ratio of the case, and do not seem to have been adopted later/further, by other judges (so far as the author is aware, save perhaps in one respect by Sheriff P J Braid in a Scottish case Lee, Applicant, 2019 S.L.T. (Sh Ct) 307 (2019)). They were (1018-1019):

'The second point which has troubled me is of a rather different order. The grant of conditional leave under s. 1 of the Act is not something which is specifically mentioned in either s. 1 or s. 17. The court is, however, given an unfettered discretion to grant leave and I would accept that, speaking generally, the court has power to grant such leave subject to conditions. Mr Bompas helpfully included in an appendix to his skeleton argument a summary of a number of cases in which leave has been granted subject to conditions of one kind or another.

Nevertheless I consider that very great caution needs to be exercised in granting conditional leave. If it is felt that leave should not be unconditional this may suggest that the better view is that it should not be granted at all. Apart from this, conditions, if imposed, may be of such a nature that they are all too easily disregarded and almost impossible to police. The sanction for breach of a condition is a severe one, for the person in breach would commit a criminal offence under s. 13. But a breach might well not come to light unless and until a second company managed by the disqualified director has come to grief and by then it will be too late to secure the intended protection for the public.'

Ferris J then went on to criticise some of the 12 conditions imposed in the case before him, remarking: (1) 'A number of them are, however, expressed in somewhat general terms' (2) as to another 'This, to my mind, may well be less effective than it sounds.' and (3) 'the extent to which [the disqualified person] will in fact be supervised by [a named individual] seems to me to be doubtful.' (1019)

In Lee, Applicant 2019 S.L.T. (Sh Ct) 307 (2019), a Scottish case in Sheriffdom of Lothian and Borders at Edinburgh, Sheriff P J Braid was also concerns about the absence of any policing of compliance with section 17 leave conditions. As part of his balancing exercise, he said, at paragraphs 28 and 29:

'This leads on to the aspect of this application which troubles me most, which is that, while the undertakings and conditions appear stringent, there is in fact no means of policing them. The pursuer is willing to undertake to comply with the conditions but it seems to me that does not add anything because he requires to comply with the order of the court in any event. While it is the Secretary of State who suggested the conditions, he has no intention of monitoring compliance, and to that extent the insistence on conditions may on one view be seen as something of a cosmetic exercise, with no teeth attached in the event of non-compliance. In relation to some of the conditions, it may well be, as counsel suggested, that in the event of non-compliance the pursuer would be at risk of acting without the leave of the court, were he to continue acting as a director whilst in breach. Even if that is the case in relation to breach of some of the conditions (for example, in relation to No.4, which requires him to resign in certain circumstances, the pursuer might be acting in contravention of his leave were he not to resign where the conditions for his doing so had been triggered), it would clearly not be the outcome of every breach. Further, as I understand it, it was previously the Secretary of State’s practice to ask the court to include in any order granting leave, a formula of words to the effect that in the event of any of the conditions attached to the order being breached, the permission granted by the court would immediately cease. However, Lady Wolffe declined to approve such wording in Buckley v Secretary of State for Business, Energy and Industrial Strategy [2017] CSOH 105 on the grounds that it would lead to uncertainty. I respectfully agree with that approach, and the Secretary of State no longer requests that such wording be inserted into any interlocutor, but the consequence of that is that one possible theoretical safeguard which may have existed if such wording had been adopted, is no longer there. The fact is that the effect of a breach of any of the conditions remains unclear.

I did wonder whether one approach might be for the court to grant interim leave for a relatively long period - say six months or a year - to monitor compliance with the order, before eventually making a final order; but I do not consider that it is the court’s function to act as a monitoring agency. In any event, the conditions have, it seems, been largely (although not absolutely) complied with since the interim order was first made in the present case. That is sufficient to give some (albeit a small) measure of comfort that the pursuer will continue to comply with the conditions when the watchful eye of the court is no longer upon him.'

'Taking account also of the lack of any monitoring of those conditions, I have also come to the view that the most effective safeguard is for this note to be available to the public, hence it will be uploaded to the SCTS website.'

In Secretary of State for Trade and Industry v Baker; Re Barings Plc [2000] 1 W.L.R. 634; [1999] B.C.C. 960, Sir Richard Scott VC, on the facts, leave was granted for the disqualified person to be a director of 3 companies (1 was a subsidiary of the other) on 3 conditions:

(1) he remain a non-executive director;
(2) he does not enter into any contract of employment;
(3) his directorship remains unpaid.

[26] It might be illuminating to consider the conditions imposed in Re Gibson Davies Ltd [1995] BCC 11 ('Gibson'),

In Gibson, Sir Mervyn Davies in the Chancery Division (Companies Court) heard an appeal against a refusal to grant section 17 leave. The applicant/appellant ('applicant') had sought section 17 leave '...to be a director of a company called  [Franchising Ltd] upon such terms and such conditions as the court should think fit'. (paragraph 1).

The applicant had been a director of a company (GDC) that went into CVL on 9.3.89. The deficiency was £125,530. The liquidator appointed to GDC itemised matters which were said to show the applicant was unfit to be concerned in the management of a company. '(1) that the [applicant] and [another] caused GDC to enter into a transaction affording a preference to themselves, contrary to s. 239 of the Insolvency Act 1986 ; (2) that by continuing to trade after distraint had been levied by the Inland Revenue the [applicant] and [another] allowed the position of creditors to be eroded; (3) that they raised misleading invoices; (4) that they paid undue remuneration when trading losses were increasing; (5) that they failed to file audited accounts.' (paragraph 6). On 1.2.93, the applicant had been disqualified for 5 years, from 22.3.93. In the section 17 leave application, the applicant said he was '...in no way seeking to go behind the reasons which led to the making of the original disqualification order.' (paragraph 4).

In the normal way, the Judge considered whether or not to allow the appeal (considered elsewhere in this article). As part of this, he found that there was a '...need for the making of an order' (paragraph 28; page 15), but that he must consider 'whether, if an order is made, there will be adequate protection for the public.'

As to this, he recorded, at paragraph 28 (page 15-16), that the applicant had offered the following safeguards:

'(1) no cheque or financial agreement on behalf of the company be signed or executed by the [applicant] alone;

(2) any director's loan owed by the company to the [applicant] shall not be repaid unless all creditors of the company are paid first;

(3) the [applicant] shall not be granted or accept any security over the company assets;

(4) the [applicant]'s total emoluments from the company shall not exceed £380 per week or such greater sum as shall hereafter be agreed in writing by the Secretary of State, such consent not to be unreasonably refused;

(5) the [applicant] shall procure the company to file annual returns and accounts at Companies House within the time limits set out in the Companies Act 1985 ;

(6) the [applicant] will procure the company to complete the implementation of the accounting controls as set out by [a named chartered accountant];

(7) the [applicant] will procure the company to prepare monthly management accounts and submit the said accounts to [a named chartered accountant] or to the company's auditors for the time being;

(8) [the named chartered accountant], or the company's auditors for the time being, shall be instructed to report to the board of directors in writing any matters of concern relating to the management or financial control of the company and in default of prompt and appropriate action by the directors of the company will bring these matters to the attention of the Secretary of State's solicitors;

(9) in the event that the company seeks to change the identity of its auditors the [applicant] will procure the company only to instruct auditors who are willing to accept and act upon the obligations set out above;

(10) the [applicant] will take no step as a shareholder or director of Congratulations Ltd (i.e. the Irish company) which would in any way impede, direct or control the activities of the company.'

Subsequently, the Judge said 'I am of the opinion that the [applicant] ought to be allowed to act as a director of Franchising by an order which incorporates the safeguards set out above.'

The actual conditions imposed, as they appeared in the Schedule to the s.17 leave order (page 17-18), were:

'1. No cheque or financial agreement on behalf of [Franchising Ltd] (‘the company’) shall be signed or executed by the [applicant] alone.

2. Any director's loan owed by the company to the [applicant] shall not be repaid unless all creditors of the company are paid first.

3. The [applicant] shall not be granted or accept any security over the company's assets.

4. The [applicant]'s total emoluments from the company shall not exceed £380 per week or such greater sum as shall hereafter be reasonably and unanimously agreed by the board of directors.

5. The [applicant] shall procure the company to file annual returns and accounts to Companies House within the time limits set out in the Companies Act 1985.

6. The [applicant] will procure the company to complete the implementation of the accounting controls as set out by [a named chartered accountant], namely:

(i) all company cheques which are required to be signed by the [applicant] shall also require the signature of one other director;

(ii) the [applicant] will procure the prompt implementation of all internal accounting controls reasonably required by [the named chartered accountant] ;

(iii) the [applicant] will procure the company to prepare monthly management accounts;

(iv) the said management accounts shall be promptly submitted to [the named chartered accountant] or to the company's auditors for the time being.

7. [the named chartered accountant] or the company's auditors for the time being shall be instructed to report to the board of directors in writing any matters of concern related to the management or financial control of the company, and the [applicant] will procure the prompt implementation of any corrective action as unanimously agreed by the board of directors to be necessary to meet those concerns.

8. In the event that the company seeks to change the identity of its auditors, the [applicant] will procure the company only to instruct auditors who are willing to accept and act upon the obligations set out above.

9. The [applicant] will take no step as a shareholder or director of Congratulations Ltd (the Irish company) which will in any way impede, direct or control the activities of the directors of the company.'

[27] For an example of where the relevant respondent opposed/resisted the section 17 leave application, see Re Liberty Holdings Unlimited [2017] BCC 298 (also known as Owen v Secretary of State for Business, Innovation and Skills)

[28] For instance:

(1) in Rwamba, the SOS: (1) adopted a neutral position; and (2) express in advance that the SOS did not wish to question the applicant, ‘…as long as [the applicant] agreed certain agreed conditions.' (Paragraph 3) Miles J said, 'The conditions are extensive and stringent, including an obligation on [the applicant] to report on his compliance with the conditions, the appointment of auditors with specific responsibilities and solicitors who will monitor [the applicant’s] compliance.’ (Paragraph 3).

(2) In Sherling, the Deputy High Court recorded the respondent Competition and Markets Authority's (‘CMA’) position ‘…provided the claimants limit their application to the particular company as identified in the draft form of order which I have been provided by the CMA, and provided the substantive conditions identified in the draft form of order are imposed, then the CMA says it has no further matters which it considers it should draw to the court's attention.'

[29] In Sherling, the Deputy High Court Judge had also said, at paragraph 3:

‘…they both say that the CMA, in pursuance of its statutory role, has given careful consideration to the claim and, accordingly, I am invited to place reliance upon the CMA's position.’

[30] In Buckley v Secretary of State for Business, Energy and Industrial Strategy [2017] CSOH 105, in Court of Session (Outer House), Lady Wolffe said, at paragraph 10:

'I agree with the Secretary of State's contention that a hearing should be fixed for an application for leave under section 17(5). The reference to calling of witnesses and leading of evidence, points to the assumption that applications for leave will be determined after a hearing in court. In my view a hearing is likely to be necessary for consideration of an application for leave under section 17(5) or a hearing in court is, at least, highly desirable. As with an application for a disqualification order, the court is being asked to weigh in the balance a variety of factors (which it is not necessary here to set out) and to determine what is in the public interest. Generally, the court will be greatly assisted by submissions in respect of such matters and for the opportunity to pose questions to, and seek explanations from, the applicant and the Secretary of State. There may be a particular need to do so if the court from which leave is sought is unfamiliar with the circumstances leading to the disqualification, as will inevitably be the case in the grant of an undertaking.' [Bold added]

In other words, the section 17 leave application cannot be dealt with by the Court administratively on the papers.

As an aside, Lady Wolffe also confirmed that the respondent is required to attend the hearing. At paragraph 11, she said:

At one point in oral submissions, it appeared to be suggested on behalf of the Secretary of State that, while a hearing was mandatory, the attendance of the Secretary of State at such a hearing was not. If that were the submission, I do not accept it. The language of section 17(5) - "shall appear" - could not be clearer. There is no good reason, consistent with the scheme of the Act, to construe those words as merely directory. As noted by the Court of Appeal in Re TLL Realisations, the first appeal against the grant of leave under section 17(5), the Secretary of State has a special position in relation to applications for leave. In my view, having regard to the language of the sub-section and the purposes of the hearing, the attendance of the Secretary of State is required at hearings on applications for leave under section 17(5). For completeness, I note that there are circumstances where persons other than the Secretary of State may appear in a like capacity (eg an official receiver in England). I express no concluded view on whether a like requirement to attend a hearing applies, though it would be surprising if the procedural requirements were different.'

[31a] In Re Barings plc. Secretary of State for Trade and Industry v Baker & Ors (No. 5) [2000] 1 W.L.R. 634[1999] BCC 960 ('Barings No.5'), Sir Richard Scott said, at 641:

‘It seems to me that the importance of protecting the public from the conduct that led to the disqualification order and the need that the applicant should be able to act as a director of a particular company must be kept in balance with one another. The court in considering whether or not to grant leave should, in particular, pay attention to the nature of the defects in company management that led to the disqualification order and ask itself whether, if leave were granted, a situation might arise in which there would be a risk of recurrence of those defects.

...

...Section 17 leave should never be granted without careful consideration and I bear in mind that one of the purposes of disqualification orders is to promote “the parliamentary intention to improve managerial safeguards and standards for the long-term good of employees, creditors and investors…:” In re Grayan Building Services Ltd. [1995] Ch. 241, 257, per Henry L.J.'

In Dawes & Henderson (Agencies) Ltd (In Liquidation) (No.2), Re Shuttleworth v Secretary of State for Trade and Industry [2000] BCC 204; [1999] 2 BCLC 317 ('Shuttleworth'), Sir Richard Scott quoted the first part of the above passage, and said, at 211:

‘I remain of the opinion expressed in that passage.'

Earlier, when referring to disqualification orders, Sir Richard Scott said, in Shuttleworth, at paragraph 2:

'The main reason why orders are made is for the protection of the public. An application under s. 17 for leave always raises the question whether the grant of leave would be consistent with the need to protect the public.'

In Re Westminster Property Management Ltd (No 2), Official Receiver v Stern [2001] BCC 305, Lloyd J gave a wider view of the likely balance, where he stated (after referring to Re TLL Realisations Ltd, Secretary of State for Trade and Industry v Collins), at 361:

‘It seems to me that the Court of Appeal was endorsing the position under which, while of course the Act does not prohibit and therefore allows the disqualified person to carry on business as a sole trader, or in partnership for that matter, without the protection of limited liability, where the question is whether an individual who has been disqualified should be allowed to act as a director of a company or be concerned in the conduct and management of a company, it seems to me that there is a burden on an applicant to show that that is justified. It seems to me to emerge from the judgment of the Court of Appeal in Secretary of State v Collins and also from the judgment of Sir Richard Scott in Re Barings (No. 5) that that is likely only to be satisfied if it can be shown that the corporate body in question has a need for the services of the person in question, that there is no risk to the public from the person in question acting as a director. and further that to allow the person in question to act as a director would not subvert or reduce the effect of the disqualification order, even if only in its deterrent effect. That seems to me to be a matter which the court must taken into account even if it is satisfied as to the protective effect of the order, as it may be sometimes, where the order is made subject to conditions and the conditions satisfy the court that, for example, someone who has not been suitably diligent in discharging duties is allowed to act as a director, but only as one of a board of perhaps a minimum size.'

ICCJ Jones in Re Property Group (2010) Ltd; Competition and Markets Authority v Martin [2020] 2 BCLC 424 ('Property Group'), said, at paragraph 110(i):

'An application for leave will enable the court to carry out a fair balancing exercise between the Article 8 rights of the individual and achieving the aims of sections 6 and 8 of the CDDA for the benefit of the general public. This is evident from the matters considered on an application for leave (see paragraph 107(a) above), which are the same matters as those required to achieve the fair balance of proportionality in an individual case.'

Later, at paragraph 109, ICCJ Jones in Property Group said that the section 17 leave application was '...when all the issues relevant to proportionality would be addressed.'

In Property Group, paragraph 107(a) read:

'As to resources, an applicant for permission when addressing the policy of protection for the public must normally commit resources for the purposes of: (i) identifying the findings of fact which resulted in disqualification; (ii) satisfying the court (potentially but not necessarily by proposing safeguards) that the removal of public protection through permission will not place the public at risk; and (iii) convincing the court that the policies of deterrence and/or maintenance/improvement of standards will not be damaged, at least not to an extent justifying the refusal of permission.'

[31b] In Re NRLB Ltd (also known as Re v None) [2024] EWHC 206 (Ch), ICC Judge Prentis, noted, at paragraph 29, this caution.

[32] The first 3 factors set out here are taken from paragraphs 48 to 50 of Miles J's judgment in Rwamba. Those 3 paragraphs are set out here in full:

'The first was that allowing Mr Rwamba to act as a director would assist in the companies’ efforts to raise external funding. All of the witnesses state that the companies wish to expand their businesses and that external funding would assist in this. The judge appears to have accepted this evidence but was concerned about the absence of compelling evidence that having Mr Rwamba as a director would assist the companies in raising finance. Having considered the emails of November 2018 Mr Sankey, the broker, I consider the companies would stand a better chance of raising funding if they were owner-managed. Mrs Kirigo fits this description, but she has said that she wishes to step back from the business and does not wish to lead its efforts to expand. It would to my mind assist fund raising efforts if Mr Rwamba was a director of the companies.

The second reason for seeking Mr Rwamba’s appointment as a director concerns the ability of the companies to expand their franchising business, particularly in the white collar employee market. The evidence shows that the companies would be assisted in these efforts by having a director with experience and expertise in accounting (both for internal reasons and to assist with training of franchisees). Mr Rwamba has that experience. Mrs Kirigo does not. It might be possible for Mr Rwamba to continue to promote the growth of this part of the business as a consultant, but I think there is force in the submission that, as this aspect of the business expands, and his own involvement in it grows, it will become more difficult for him to ensure that he does not become involved in the management of the companies. That may be a difficult line to draw and it is understandable that leave is sought. Mrs Kirigo explains that when she deals with customers and franchisees they often wish to come back to Mr Rwamba, who appears to be seen as integral to the business. I am satisfied that it would assist the companies’ ability to grow their business to have Mr Rwamba as part of their public face as a director. I do not think that it is an answer to this point to say that the companies have been able to trade profitably in the past using his services as a consultant: see Re Barings (No.3) where a similar argument was rejected.

The third area of evidence highlighted by Mr Sims was the wish of Mrs Kirigo to spend more time with her daughter, who has special educational needs. Mrs Kirigo has explained that she wishes to spend more time with her daughter and less time working at the companies. This consideration does not directly affect the business of the companies, but that does not render it irrelevant: see Re Dawes & Henderson. I also note that the companies have done little to seek an outside director, but that is understandable in light of Mr Rwamba’s close historical involvement in the business and the knowledge that has given him. I also note that the companies are not large businesses. I consider that the wish of Mrs Kirigo as director to step back from the business in favour of Mr Rwamba is a further factor I can take into account.’

Another example, this time from Re Morija PLC (also known as Secretary of State for Business, Enterprise and Regulatory Reform v Kluk) [2007] EWHC 3055 (Ch), can be found in Sir Andrew Park's obiter comments, at paragraph 56.

'In favour of a grant of leave are the following: that there is a particularly strong case of need on the part of [the 2 companies] for [the disqualified person] to be able to remain a director; that (perhaps a particular aspect of the same point about need) a satisfactory business which provides employment for several persons is seriously at risk of having to be closed if [the disqualified person] cannot remain as a director; and that [the disqualified person] did not himself perpetrate either of the two frauds. Against a grant of leave are the following: that when [the disqualified person] found out about the frauds he plainly ought to have revealed them instead of keeping quiet and hoping that noone would find out; that, although the frauds were perpetrated by [the disqualified person's] brother, [the disqualified person] would have taken a personal benefit from them if they had succeeded; that a grant of leave would (as I have said in paragraph 54 above) give altogether the wrong message to directors of private companies generally; and that ten years is a long period of disqualification, longer (if I recall correctly what I was told) than the term in any other case where leave has been granted.'

[33] In Re Morija PLC (also known as Secretary of State for Business, Enterprise and Regulatory Reform v Kluk) [2007] EWHC 3055 (Ch), Sir Andrew Park at paragraph 43 said:

'I begin by saying something about the nature of this appeal. The words in s.1A of the CDDA ‘unless he has the leave of the court’ confer a discretion on the court. Subject to what I say later in this paragraph, I agree with what [counsel for Secretary of State] said in his skeleton argument:

“…this is a true appeal which means that the decision can only be interfered with if the learned Registrar's exercise of discretion was outside the ‘generous ambit within which a reasonable disagreement is possible’ or was obviously wrong."

The quotation within that sentence is taken from the judgment of Peter Gibson LJ in the TLL Realisations case, and is the main basis on which the members of the Court of Appeal, while clearly unhappy about my first instance decision to grant leave, concluded that they ought not to set it aside. In that case the limited scope of an appeal worked in favour of the director concerned. In this case it works against him. [Counsel for the disqualified person], broadly accepted what [counsel for Secretary of State] said as to the nature of the appeal, but he added other circumstances in which the court could interfere with the Registrar's decision:

“On an appeal such as this it is necessary to show that the learned Registrar erred, in effect by reaching a conclusion outside the generous ambit within which a reasonable disagreement is possible or by misdirecting himself by taking into account matters that he should not have done or by failing to take into account matters that he should have done or by having failed to balance the various factors fairly in the scale.”'

[34] In Practice Direction: Directors Disqualification Proceedings [2015] BCC 224, in Part Nine: Appeals, paragraph 32 says:

'32. Appeals

32.1. Rules 7.47 and 7.49A of the Insolvency Rules, as supplemented by [Pt Five] of the Practice Direction: Insolvency Proceedings [2014] B.C.C. 502, apply to an appeal from, or review of, a decision made by the court in the course of:

(1) disqualification proceedings under any of ss.6–8A or 9A of the Act;

(2) an application made under s.17 of the Act for the purposes of any of ss.1(1)(a), 1A(1)(a) or 9B(4), for permission to act notwithstanding a disqualification order made, or a disqualification undertaking accepted, under any of ss.6–10.

Any such decision, and any appeal from it, constitutes “insolvency proceedings” for the purposes of the Practice Direction: Insolvency Proceedings.

32.2. An appeal from a decision made by the court in the course of disqualification proceedings under any of ss.2(2)(a), 3 or 4 of the Act or on an application for permission to act notwithstanding a disqualification order made under any of those sections is governed by CPR Pt 52 and Practice Direction 52.'

[35] In Re NRLB Ltd (also known as Re v None) [2024] EWHC 206 (Ch), under the heading 'BMG: a balancing exercise', ICC Judge Prentis refused the disqualified persons' s.17 application (paragraph 165). The judge said:

'160. This wide public interest must of course be placed in the balance against [disqualified person's] individual interests, and the interests of [company 1] and its staff and those with whom it deals. But it is a public interest which on the evidence is under a degree of threat were this application to be granted. Further, it must be recalled that the burden is on [disqualified person]. Here, he has admitted the Infringements, which he brought about and the economic benefit of which he later caused to be pursued through the issue of false invoices. The Shell Building Infringement was one of cover bidding, a dishonest activity. [Counsel for the disqualified person] submits that there have been no breaches since 2014, but on 2 May 2017 [disqualified person] was still ensuring [company] gained the economic benefit of the Shell Building Infringement through the submission of the final false invoice to McGee. Moreover, the Infringements and the invoices were at a time when year on year [company] was proclaiming to the United Nations its adherence to the UN Global Compact and its “zero tolerance policy towards corruption and bribery”. That proclamation was entirely hollow.

161. It is right to say that [disqualified person's] disqualification was “only” in the Sevenoaks middle bracket; but as was said in Fourfront, the main consideration is not the period but the reasons for disqualification.

162. I also bear in mind that [disqualified person] has demonstrated a cogent reason for his continuance in office; and that there is a likelihood that his exclusion from that office will cause significant if not catastrophic economic harm to [company 1] and those interested and dealing with it. I am not, though, persuaded that [disqualified person] acting as a consultant is doomed to failure; nor that an outsider or possibly outsiders could not be found to fulfil his role.

163. I also recognise, with the qualifications described, that [company 1] has overhauled its compliance regime and expended considerable sums (including covering the reasonable costs of the CMA) in effecting that regime and agreeing the interim conditions; and that there is nothing to suggest those conditions, in place now for 6 months, have not been and will not be effective (subject always to any desirable adjustments).

164. However, this is also a case, as was Morija, in which the self-same [disqualified person] is proposed to be left at the head of the entity which offended both against the UN and the UK competition laws, for the entirety of the period of his disqualification. That seems to me an overly great intrusion into the public benefits of this disqualification.

165. I will therefore refuse [disqualified person's] application in respect of [company 1], subject to a run-off period which will be discussed below.

166. As a cross-check, I do not consider that our postulate member of the public would be offended by that conclusion.'

[36a] The picture could be clearer, but this position seems to be as follows. The disqualification order is made under s.1 of the Company Director Disqualification Act 1986 ('1986 Act'). Section 1(1) of the 1986 Act provides:

'In the circumstances specified below in this Act a court may, and under sections 6 and 9A shall, make against a person a disqualification order, that is to say an order that for a period specified in the order-

(a) he shall not be a director of a company, act as receiver of a company's property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court, and

(b) he shall not act as an insolvency practitioner.' [bold added]

Section 22 of the 1986 Act is entitled 'Interpretation' and section 22(1) provides, and section 22(2) contains:

'This section has effect with respect to the meaning of expressions used in this Act, and applies unless the context otherwise requires.

“Company” means—-

(a) a company registered under the Companies Act 2006 in Great Britain, or

(b) a company that may be wound up under Part 5 of the Insolvency Act 1986 (unregistered companies).

...

(4) “Director” includes any person occupying the position of director, by whatever name called.'

Pausing there, on first blush: (a) LLPs are not companies 'registered under the Companies Act 2006 in Great Britain'; and (b) probably don't come within section 22(2) (though s.220(1) in Part 5 of the Insolvency Act 1986, entitled 'meaning of "unregistered company" is difficulty to follow).

But, reference must be made to Limited Liability Partnerships Regulations 2001/1090 ('2001 Regs'), made pursuant to section 17(4) of the Limited Liability Partnerships Act 2000. 2001 Regs, s.4(2) provides:

'(2) The provisions of the Company Director Disqualification Act 1986 shall apply to limited liability partnerships, except where the context otherwise requires, with the following modifications-

(a) references to a company shall include references to a limited liability partnership;

(b) references to the Companies Acts shall include references to the principal Act and regulations made thereunder and references to the companies legislation shall include references to the principal Act, regulations made thereunder and to any enactment applied by regulations to limited liability partnerships;

...

(f) references to a shadow director shall include references to a shadow member;

(g) references to a director of a company or to an officer of a company shall include references to a member of a limited liability partnership;

(i) such further modifications as the context requires for the purpose of giving effect to that legislation as applied by these Regulations.' [bold added]

So, the order that the Court may/must make by s.1 of the 1986 Act against the disqualified person, is that:

'(a) he shall not be a director of a company, act as receiver of a company's property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court'

- reading 'director of a company' to include 'member of a limited liability partnership'; and

- reading 'company' to include 'limited liability partnership'

[36b] In the Cork Report (i.e. the final report (1982 Cmnd. 8558) produced by the Review Committee on Insolvency Law and Practice (Sir Kenneth Cork, with Peter Millett QC and Muir Hunter QC, amongst others)), it referred to the 'privilege of limited liability' (paragraph 1805).

[37] In Secretary of State for Business, Energy and Industrial Strategy v Geoghegan (also known as Re Bell Pottinger LLP [2021] EWHC 672 (Ch) [2022] 1 All ER (Comm) 815, Michael Green J, under the heading 'The policy of the CDDA', at paragraphs 30 to 33, said:

'The most recent consideration of the CDDA is in the judgment of Falk J in In re Keeping Kids Company Ltd [2021] EWHC 175 (Ch) (“Kids Company”). In para 144, Falk J set out the well-established principles from earlier authority as to the application by the court of the test under section 6. As she herself said, this largely drew on Jonathan Parker J's judgment in Secretary of State for Trade and Industry v Baker [1999] 1 BCLC 433 . As to the policy of the CDDA, Falk J said at para 144(c): “The primary purpose of the jurisdiction under s 6 is to protect the public against the future conduct of companies by persons whose past records as directors of insolvent companies have shown them to be a danger to others.”

Parliament's intention in relation to section 6 of the CDDA is also to raise standards of those who trade with the benefit of limited liability. As Sir Donald Nicholls V-C, sitting in the Court of Appeal with Farquharson and Steyn LJJ, said in Secretary of State for Trade and Industry v Ettinger [1993] BCLC 896, 899 :

“those who make use of limited liability must do so with a proper sense of responsibility. The directors’ disqualification procedure is an important sanction introduced by Parliament to raise standards in this regard.”

In In re Grayan Building Services Ltd [1995] Ch 241 , Hoffmann LJ set out the test to be applied under section 6 of the CDDA , which I will come back to. But the other members of the Court of Appeal made some more generalised comments about the purpose of the CDDA. Henry LJ said as follows, p 257:

“The concept of limited liability and the sophistication of our corporate law offers great privileges and great opportunities for those who wish to trade under that regime. But the corporate environment carries with it the discipline that those who avail themselves of those privileges must accept the standards laid down and abide by the regulatory rules and disciplines in place to protect creditors and shareholders. And, while some significant corporate failures will occur despite the directors exercising best managerial practice, in many, too many, cases there have been serious breaches of those rules and disciplines, in situations where the observance of them would or at least might have prevented or reduced the scale of the failure and consequent loss to creditors and investors. The parliamentary intention *786 to improve managerial safeguards and standards for the long term good of employees, creditors and investors is clear … The statutory corporate climate is stricter than it has ever been, and those enforcing it should reflect the fact that Parliament has seen the need for higher standards.”

Neill LJ added, p 258:

“Those who trade under the regime of limited liability and who avail themselves of the privileges of that regime must accept the standards of probity and competence to which the law requires company directors to conform.”

The emphasis in those passages is on those trading with the privilege of limited liability.'

[38] In Secretary of State for Business, Energy and Industrial Strategy v Geoghegan (also known as Re Bell Pottinger LLP [2021] EWHC 672 (Ch) [2022] 1 All ER (Comm) 815, Michael Green J, after noting the passages quoted at footnote 37 above, said at paragraph 33:

'The emphasis in those passages is on those trading with the privilege of limited liability. In relation to companies, that clearly is a reference to the directors who are the ones doing the trading. Limited liability as a concept can, perhaps more appropriately, be applied to the shareholders of a company who will not have any further liability to the company or its creditors if they hold fully paid up shares. But so far as the CDDA regime is concerned, the focus is on the directors who also have the benefit of limited liability in the sense that they do not generally bear personal responsibility for the company's debts and liabilities. That benefit does require directors to behave appropriately and to a standard that has been set by Parliament and applied by the courts.'

As an aside:

(1) directors of course owe the company the full spectrum of directors duties, which, if breached, give rise to them being liable to the company for loss and damaged caused. It might be said that this generates an indirect form of potential liability for, or at least linked to, some company debts/liabilities (if these company debts/liabilities are 'caused' by the breach of directors duties);

(2) directors can become potentially liable to re-imburse/replenish the company assets, to meet/off set certain debts and liabilities the company has incurred. This potential liability arises where the situation crosses the line into wrongful trading under s.214 of the Insolvency Act 1986. Directors might be ordered to pay to the company money, to meet/set off company debts/liabilities incurred, in essence, (a) when it was inevitable that the company would't avoid insolvent liquidation/administration; (b) when the directors knew or ought to have known this; and (c) when the directors cannot say that they were taking every step that they ought to have taken with a view to minimising the potential loss to the company’s creditors. See Wright v Chappell (also known as Re BHS Group Lmited) [2024] EWHC 1417 (Ch), from paragraph 461, for a summary of the law on wrongful trading s.214.

[39] In Re NRLB Ltd (also known as Re v None) [2024] EWHC 206 (Ch), ICC Judge Prentis, before quoting this passage, noted, at paragraph 27, that:

'In Re Dawes & Henderson (Agencies) Ltd (No 2) [1999] 2 BCLC 317 at 325 Sir Richard Scott V-C stood by dicta of his own in Re Barings plc (No 4) [1999] 1 BCLC 262 at 269 balancing an applicant’s need against risk of recurrence:'