Small Business, Enterprise and Employment Bill (HC Bill 11)

Section 99

SCHEDULE 7 Sections 92 to 98: consequential and related amendments

Part 1 Company Directors Disqualification Act 1986

1 5The Company Directors Disqualification Act 1986 is amended as follows.

2 In section 1 (disqualification orders: general) in subsection (2), for “section 6”
substitute “sections 6 and 8ZA”.

3 (1) Section 1A (disqualification undertakings: general) is amended as follows.

(2) In subsection (1), for “7 and 8” substitute “5A, 7, 8, 8ZC and 8ZE”.

(3) 10In subsection (2), after “7” insert “or 8ZC”.

4 (1) Section 2 (disqualification on conviction of indictable offence) is amended as
follows.

(2) After subsection (1) insert—

“(1A) In subsection (1), “company” includes overseas company.”

(3) 15In subsection (2), after paragraph (a) insert—

“(aa) in relation to an overseas company not falling within
paragraph (a), the High Court or, in Scotland, the Court of
Session, or”.

5 (1) Section 3 (disqualification for persistent breaches of companies legislation)
20is amended as follows.

(2) After subsection (3) insert—

“(3A) In this section “company” includes overseas company.”

(3) In subsection (4)—

(a) after “means” insert“—

(b) after “committed” insert “, or

(b) in relation to an overseas company not falling within
paragraph (a), the High Court or, in Scotland, the
Court of Session.”

6 30In section 5 (disqualification on summary conviction), after subsection (4A)
insert—

“(4B) In this section “company” includes overseas company.”

7 In section 6 (duty of court to disqualify unfit directors of insolvent
companies), in subsection (2), omit “and the next”.

8 35In section 7 (disqualifications under section 6: applications and
undertakings), after subsection (4) insert—

“(5) Subsections (1A) and (2) of section 6 apply for the purposes of this
section as they apply for the purposes of that section.”

9 Before section 8A insert—

“Further provision about disqualification undertakings”

10 In section 8A (variation etc of disqualification undertaking), in subsection
(3)—

(a) before paragraph (a) insert—

“(za) 5in the case of an undertaking given under section 8ZC
has the same meaning as in section 8ZA;

(zb) in the case of an undertaking given under section 8ZE
means the High Court or, in Scotland, the Court of
Session;”, and

(b) 10in subsection (3)(b), after “section” insert “5A(5),”.

11 In section 10 (participation in wrongful trading), after subsection (2) insert—

“(3) In this section “company” includes overseas company.”

12 (1) Section 16 (application for disqualification order) is amended as follows.

(2) In subsection (1), omit “by the court having jurisdiction to wind up a
15company”.

(3) In subsection (2)—

(a) for “with jurisdiction to wind up companies” substitute “, other than
a court mentioned in section 2(2)(b) or (c),”, and

(b) after “any company” insert “or overseas company”.

13 (1) 20Section 17 (application for leave under an order or undertaking) is amended
as follows.

(2) In subsection (3), after “under section” insert “5A,”.

(3) After subsection (3) insert—

“(3ZA) Where a person is subject to a disqualification undertaking accepted
25at 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
30at 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.”

14 In section 18 (register of disqualification orders and undertakings), in
subsection (2A)(a), for “7 or 8” substitute “5A, 7, 8, 8ZC or 8ZE”.

15 35In section 20 (admissibility in evidence of statements), in subsection (1), for
“6 to 10, 15” substitute “5A, 6 to 10, 12C, 15 to 15C”.

16 In section 21 (interaction with Insolvency Act 1986), in each of subsections
(2) and (3), for “6 to 10, 13, 14, 15” substitute “5A, 6 to 10, 12C to 15C”.

17 In section 22 (interpretation), after subsection (2) insert—

“(2A) 40An “overseas company” is a company incorporated or formed
outside Great Britain.”

18 In section 22A (application of Act to building societies), omit subsection (4).

19 In section 22B (application of Act to incorporated friendly societies)—

(a) after subsection (3) insert—

“(3A) In relation to an incorporated friendly society, this Act
5applies as if sections 8ZA to 8ZE were omitted.”, and

(b) omit subsection (4).

20 In section 22C (application of Act to NHS foundation trusts) omit subsection
(3).

21 Omit section 22D (application of Act to open-ended investment companies).

22 (1) 10Section 22E (application of Act to registered societies) is amended as follows.

(2) In subsection (4)—

(a) omit paragraph (c), and

(b) after paragraph (e) insert—

“(f) sections 8ZA to 8ZE are to be disregarded.”

(3) 15Omit subsection (5).

23 In section 22F (application of Act to charitable incorporated organisations)
omit subsection (4).

Part 2 Other enactments

20Companies (Audit, Investigations and Community Enterprises) Act 2004

24 Omit paragraph 28 of Schedule 2 to the Companies (Audit, Investigations
and Community Enterprises) Act 2004.

Companies Act 2006

25 Omit section 1039 of the Companies Act 2006 (disqualification orders
25consequential amendments).

Section 100

SCHEDULE 8 Northern Ireland: provision corresponding to sections 92 to 99

The Company Directors Disqualification (Northern Ireland) Order 2002

1 In this Schedule “the 2002 Order” means the Company Directors
30Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4)S.I. 2002/3150 (N.I. 4)).

Convictions abroad

2 (1) After Article 8 of the 2002 Order insert—

“8A Disqualification for certain convictions abroad

(1) If it appears to the Department that it is expedient in the public
5interest that a disqualification order under this Article should be
made against a person, the Department may apply to the High Court
for such an order.

(2) The High Court may, on an application under paragraph (1), make a
disqualification order against a person who has been convicted of a
10relevant foreign offence.

(3) A “relevant foreign offence” is an offence committed outside
Northern Ireland—

(a) in connection with—

(i) the promotion, formation, management, liquidation
15or striking off of a company (or any similar
procedure),

(ii) the receivership of a company’s property (or any
similar procedure), or

(iii) a person being an administrative receiver of a
20company (or holding a similar position), and

(b) which corresponds to an indictable offence under the law of
Northern Ireland.

(4) Where it appears to the Department that, in the case of a person who
has offered to give a disqualification undertaking—

(a) 25the person has been convicted of a relevant foreign offence,
and

(b) it is expedient in the public interest that the Department
should accept the undertaking (instead of applying, or
proceeding with an application, for a disqualification order),

30the Department may accept the undertaking.

(5) In this Article, “company” includes an overseas company.

(6) The maximum period of disqualification under an order under this
Article is 15 years.”

(2) Article 8A(2) and (4) of the 2002 Order, as inserted by this paragraph, apply
35in relation to a conviction for a relevant foreign offence which occurs on or
after the day on which this paragraph comes into force regardless of whether
the act or omission which constituted the offence occurred before that day.

Determining unfitness and disqualification orders: matters to be taken into account

3 (1) The 2002 Order is amended as follows.

(2) 40In Article 9 (duty of High Court to disqualify unfit directors of insolvent
companies)—

(a) in paragraph (1)(b), for “any other company or companies”
substitute “one or more other companies or overseas companies”,

(b) after paragraph (1) insert—

“(1A) In this Article references to a person’s conduct as a director of
any company or overseas company include, where that
company or overseas company has become insolvent,
5references to that person’s conduct in relation to any matter
connected with or arising out of the insolvency.”,

(c) in paragraph (2), omit the words from “and references” to the end,
and

(d) after paragraph (2) insert—

“(2A) 10For the purposes of this Article, an overseas company
becomes insolvent if the company enters into insolvency
proceedings of any description (including interim
proceedings) in any jurisdiction.

(2B) In this Article and Article 10, “director” includes a shadow
15director.”

(3) In Article 11 (disqualification where expedient in public interest)—

(a) in paragraph (3)(a) after “shadow director” insert “(either taken
alone or taken together with his conduct as a director or shadow
director of one or more other companies or overseas companies),”,

(b) 20in paragraph (4) after “the company” insert “(either taken alone or
taken together with his conduct as a director or shadow director of
one or more other companies or overseas companies)”, and

(c) after paragraph (4) insert—

“(4A) Paragraph (1A) of Article 9 applies for the purposes of this
25Article as it applies for the purposes of that Article.”

(4) Omit Article 13 (matters for determining unfitness of directors).

(5) After Article 17 insert—

“17A Determining unfitness etc.: matters to be taken into account

(1) This Article applies where the High Court must determine—

(a) 30whether a person’s conduct as a director of one or more
companies or overseas companies makes the person unfit to
be concerned in the management of a company;

(b) whether to exercise any discretion it has to make a
disqualification order under any of Articles 5 to 7, 8A, 11

35

or
14;

(c) where the Court has decided to make a disqualification order
under any of those Articles or is required to make an order
40under Article 9, what the period of disqualification should
be.

(2) This Article also applies where the Department must determine—

(a) whether a person’s conduct as a director of one or more
companies or overseas companies makes the person unfit to
45be concerned in the management of a company;

(b) whether to exercise any discretion the Department has to
accept a disqualification undertaking under any of Articles
8A, 10 or 11.

(3) In making any such determination in relation to a person, the High
Court or the Department must—

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

(b) 5in 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.

(4) In this Article “director” includes a shadow director.

(5) 10Paragraph (1A) of Article 9 applies for the purposes of this Article as
it applies for the purposes of that Article.

(6) The Department may by order modify Schedule 1; and such an order
may contain such transitional provision as may appear to the
Department to be necessary or expedient.

(7) 15An order under paragraph (5) is subject to affirmative resolution.”

(6) For Schedule 1 (matters determining unfitness of directors) substitute—

Article 17A

“Schedule 1 Determining unfitness etc: matters to be taken into account

Matters to be taken into account in all cases

1 The extent to which the person was responsible for the causes of
20any 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 25The 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.

30Additional matters to be taken into account where the 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
35or overseas company.

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

Interpretation

8 Paragraphs (1A) to (2A) of Article 9 apply for the purposes of this
Schedule as they apply for the purposes of that Article.

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

5Extension of period for applying for disqualification order for unfit directors

4 (1) In Article 10(2) of the 2002 Order (period within which application may be
made for disqualification order against unfit director of insolvent company),
for “2 years” substitute “3 years”.

(2) Sub-paragraph (1) applies only to an application relating to a company
10which has become insolvent after the commencement of that sub-paragraph.

(3) Article 9(2) of the 2002 Order (meaning of “becoming insolvent”) applies for
the purposes of sub-paragraph (2) as it applies for the purposes of Article 9
of that Order.

Reports of office-holders on conduct of directors of insolvent companies

5 (1) 15The 2002 Order is amended as follows.

(2) After Article 10 insert—

“10A Office-holder’s report on conduct of directors

(1) The office-holder in respect of a company which is insolvent must
prepare a report (a “conduct report”) about the conduct of each
20person who was a director of the company—

(a) on the insolvency date, or

(b) at any time during the period of 3 years ending with that
date.

(2) For the purposes of this Article a company is insolvent if—

(a) 25the company is in liquidation and at the time it went into
liquidation its assets were insufficient for the payment of its
debts and other liabilities and the expenses of the winding
up,

(b) the company has entered administration, or

(c) 30an administrative receiver of the company has been
appointed;

and paragraph (1A) of Article 9 applies for the purposes of this
Article as it applies for the purposes of that Article.

(3) A conduct report must, in relation to each person, describe any
35conduct of the person which may assist the Department in deciding
whether to exercise the power under Article 10(1) or (3) in relation to
that person.

(4) The office-holder must send the conduct report to the Department
before the end of—

(a) 40the period of 3 months beginning with the insolvency date, or

(b) such other longer period as the Department considers
appropriate in the particular circumstances.

(5) If new information comes to the attention of an office-holder, the
office-holder must send that information to the Department as soon
as reasonably practicable.

(6) “New information” is information which an office-holder considers
5should have been included in a conduct report prepared in relation
to the company, or would have been so included had it been
available before the report was sent.

(7) If there is more than one office-holder in respect of a company at any
particular time (because the company is insolvent by virtue of falling
10within more than one sub-paragraph of paragraph (2) at that time),
paragraph (1) applies only to the first of the office-holders to be
appointed.

(8) In the case of a company which is at different times insolvent by
virtue of falling within one or more different sub-paragraphs of
15paragraph (2)—

(a) the references in paragraph (1) to the insolvency date are to
be read as references to the first such date during the period
in which the company is insolvent, and

(b) paragraph (1) does not apply to an office-holder if at any time
20during the period in which the company is insolvent a
conduct report has already been prepared and sent to the
Department.

(9) The “office-holder” in respect of a company which is insolvent is—

(a) in the case of a company being wound up by the High Court,
25the official receiver;

(b) in the case of a company being wound up otherwise, the
liquidator;

(c) in the case of a company in administration, the administrator;

(d) in the case of a company of which there is an administrative
30receiver, the receiver.

(10) The “insolvency date”—

(a) in the case of a company being wound up by the High Court,
means the date on which the Court makes the winding-up
order (see Article 105 of the Insolvency (Northern Ireland)
35Order 1989);

(b) in the case of a company being wound up by way of a
members’ voluntary winding up, means the date on which
the liquidator forms the opinion that the company will be
unable to pay its debts in full (together with interest at the
40official rate) within the period stated in the directors’
declaration of solvency under Article 75 of the Insolvency
(Northern Ireland) Order 1989;

(c) in the case of a company being wound up by way of a
creditors’ voluntary winding up where no such declaration
45under Article 75 of that Order has been made, means the date
of the passing of the resolution for voluntary winding up;

(d) in the case of a company which has entered administration,
means the date the company did so;

(e) in the case of a company in respect of which an
administrative receiver has been appointed, means the date
of that appointment.

(11) For the purposes of paragraph (10)(e), any appointment of an
5administrative receiver to replace an administrative receiver who
has died or vacated office pursuant to Article 55 of the Insolvency
(Northern Ireland) Order 1989 is to be ignored.

(12) In this Article, “director” includes a shadow director.”

(3) In Article 10 (disqualification order or undertaking and reporting
10provisions), omit paragraph (4).

(4) For the heading to Article 10 substitute “Disqualification orders under
Article 9: applications and acceptance of undertakings”.

(5) In consequence of the amendment made by sub-paragraph (3), omit
paragraph 64 of Schedule 2 to the Insolvency (Northern Ireland) Order 2005
15(S.I. 2005/1455 (N.I. 10)S.I. 2005/1455 (N.I. 10)).

Directors: removal of restriction on application for disqualification order

6 (1) The 2002 Order is amended as follows.

(2) In Article 11 (disqualification of director after investigation of company)—

(b) omit paragraph (2), and

(c) 20in paragraph (3), omit “from such report, information or documents”.

(3) For the heading of that Article substitute “Disqualification of director on
finding of unfitness”.

Persons instructing unfit director

7 After Article 11 of the 2002 Order insert—

“Persons instructing unfit directors

11A 25Order disqualifying person instructing unfit director of insolvent
company

(1) The High Court may make a disqualification order against a person
(“P”) if, on an application under Article 11B, it is satisfied—

(a) either—

(i) 30that a disqualification order under Article 9 has been
made against a person who is or has been a director
(but not a shadow director) of a company, or

(ii) that the Department has accepted a disqualification
undertaking from such a person under Article 10(3),
35and

(b) that P exercised the requisite amount of influence over the
person.

That person is referred to in this Article as “the main transgressor”.

(2) For the purposes of this Article, P exercised the requisite amount of
influence over the main transgressor if any of the conduct—

(a) for which the main transgressor is subject to the order made
under Article 9, or

(b) 5in relation to which the undertaking was accepted from the
main transgressor under Article 10(3),

was the result of the main transgressor acting in accordance with P’s
directions or instructions.

(3) But P does not exercise the requisite amount of influence over the
10main transgressor by reason only that the main transgressor acts on
advice given by P in a professional capacity.

(4) Under this Article the minimum period of disqualification is 2 years
and the maximum period is 15 years.

11B Application for order under Article 11A

(1) 15If it appears to the Department that it is expedient in the public
interest that a disqualification order should be made against a person
under Article 11A, the Department may—

(a) make an application to the High Court for such an order, or

(b) in a case where an application for an order under Article 9
20against the main transgressor has been made by the official
receiver, direct the official receiver to make such an
application.

(2) Except with the leave of the High Court, an application for a
disqualification order under Article 11A must not be made after the
25end of the period of 3 years beginning with the day on which the
company in question became insolvent (within the meaning given by
Article 9(2)).

(3) Paragraph (5) of Article 10 applies for the purposes of this Article as
it applies for the purposes of that Article.

11C 30Disqualification undertaking instead of an order under Article 11A

(1) If it appears to the Department that it is expedient in the public
interest to do so, the Department may accept a disqualification
undertaking from a person (“P”) if—

(a) any of the following is the case—

(i) 35a disqualification order under Article 9 has been
made against a person who is or has been a director
(but not a shadow director) of a company,

(ii) the Department has accepted a disqualification
undertaking from such a person under Article 10(3),
40or

(iii) it appears to the Department that such an
undertaking could be accepted from such a person (if
one were offered), and

(b) it appears to the Department that P exercised the requisite
45amount of influence over the person.

That person is referred to in this Article as “the main transgressor”.