Small Business, Enterprise and Employment Bill (HL Bill 103)

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(a) the 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
5proceeding with an application, for a disqualification order),

the 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) 10Article 8A(2) and (4) of the 2002 Order, as inserted by this paragraph, apply
in 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) 15The 2002 Order is amended as follows.

(2) In 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) 20after 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,
references to that person’s conduct in relation to any matter
25connected 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) For the purposes of this Article, an overseas company
30becomes 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
director.

(3) 35In 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) in paragraph (4) after “the company” insert “(either taken alone or
40taken 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
Article as it applies for the purposes of that Article.

(4) 45Omit Article 13 (matters for determining unfitness of directors).

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(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) whether a person’s conduct as a director of one or more
5companies 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 or
1014;

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

(2) 15This 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
be concerned in the management of a company;

(b) whether to exercise any discretion the Department has to
20accept 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
25in 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.

(4) 30In this Article “director” includes a shadow director.

(5) Paragraph (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
35Department to be necessary or expedient.

(7) An 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 40The 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.

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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
5paragraph 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 the person is or has been a director

5 10Any 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 15The 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 20In this Schedule “director” includes a shadow director.

Extension 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) 25Sub-paragraph (1) applies only to an application relating to a company
which 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.

30Reports of office-holders on conduct of directors of insolvent companies

5 (1) The 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
35prepare a report (a “conduct report”) about the conduct of each
person 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.

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

(a) the 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
5up,

(b) the company has entered administration, or

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

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

(3) A conduct report must, in relation to each person, describe any
conduct 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) 15The office-holder must send the conduct report to the Department
before the end of—

(a) the 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) 20If 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
should have been included in a conduct report prepared in relation
25to 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
within more than one sub-paragraph of paragraph (2) at that time),
30paragraph (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
paragraph (2)

(a) 35the 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
during the period in which the company is insolvent a
40conduct 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,
the official receiver;

(b) 45in the case of a company being wound up otherwise, the
liquidator;

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

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

(10) The “insolvency date”—

(a) in the case of a company being wound up by the High Court,
5means the date on which the Court makes the winding-up
order (see Article 105 of the Insolvency (Northern Ireland)
Order 1989);

(b) in the case of a company being wound up by way of a
members’ voluntary winding up, means the date on which
10the liquidator forms the opinion that the company will be
unable to pay its debts in full (together with interest at the
official rate) within the period stated in the directors’
declaration of solvency under Article 75 of the Insolvency
(Northern Ireland) Order 1989;

(c) 15in the case of a company being wound up by way of a
creditors’ voluntary winding up where no such declaration
under 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,
20means 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
25administrative 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
30provisions), 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
35(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) 40in paragraph (3), omit “from such report, information or documents”.

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

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Persons instructing unfit director

7 After Article 11 of the 2002 Order insert—

Persons instructing unfit directors

11A Order disqualifying person instructing unfit director of insolvent
company

(1) 5The High Court may make a disqualification order against a person
(“P”) if, on an application under Article 11B, it is satisfied—

(a) either—

(i) that a disqualification order under Article 9 has been
made against a person who is or has been a director
10(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),
and

(b) that P exercised the requisite amount of influence over the
15person.

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
20under Article 9, or

(b) in 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) 25But P does not exercise the requisite amount of influence over the
main 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 30Application for order under Article 11A

(1) If 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) 35in a case where an application for an order under Article 9
against 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
40disqualification order under Article 11A must not be made after the
end 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)).

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

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

(1) If it appears to the Department that it is expedient in the public
5interest to do so, the Department may accept a disqualification
undertaking from a person (“P”) if—

(a) any of the following is the case—

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

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

(iii) it appears to the Department that such an
15undertaking could be accepted from such a person (if
one were offered), and

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

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

(2) 20For 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
disqualification order made under Article 9,

(b) in relation to which the disqualification undertaking was
25accepted from the main transgressor under Article 10(3), or

(c) which led the Department to the conclusion set out in
paragraph (1)(a)(iii),

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

(3) 30But P does not exercise the requisite amount of influence over the
main transgressor by reason only that the main transgressor acts on
advice given by P in a professional capacity.

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

11D 35Order disqualifying person instructing unfit director: other cases

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

(a) either—

(i) that a disqualification order under Article 11 has been
40made 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 11(3),
and

(b) 45that P exercised the requisite amount of influence over the
person.

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

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(2) The Department may make an application to the High Court for a
disqualification order against P under this Article if it appears to the
Department that it is expedient in the public interest for such an
order to be made.

(3) 5For 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 11, or

(b) in relation to which the undertaking was accepted from the
10main transgressor under Article 11(3),

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

(4) But P does not exercise the requisite amount of influence over the
main transgressor by reason only that the main transgressor acts on
15advice given by P in a professional capacity.

(5) Under this Article the maximum period of disqualification is 15
years.

11E Disqualification undertaking instead of an order under Article 11D

(1) If it appears to the Department that it is expedient in the public
20interest to do so, the Department may accept a disqualification
undertaking from a person (“P”) if—

(a) any of the following is the case—

(i) a disqualification order under Article 11 has been
made against a person who is or has been a director
25(but not a shadow director) of a company,

(ii) the Department has accepted a disqualification
undertaking from such a person under Article 11(3),
or

(iii) it appears to the Department that such an
30undertaking could be accepted from such a person (if
one were offered), and

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

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

(2) 35For 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
disqualification order made under Article 11,

(b) in relation to which the disqualification undertaking was
40accepted from the main transgressor under Article 11(3), or

(c) which led the Department to the conclusion set out in
paragraph (1)(a)(iii),

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

(3) 45But P does not exercise the requisite amount of influence over the
main transgressor by reason only that the main transgressor acts on
advice given by P in a professional capacity.

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Compensation orders and undertakings

8 After Article 19 of the 2002 Order insert—

Compensation orders and undertakings

19A Compensation orders and undertakings

(1) 5The High Court may make a compensation order against a person on
the application of the Department if the Court is satisfied that the
conditions mentioned in paragraph (3) are met.

(2) If it appears to the Department that the conditions mentioned in
paragraph (3) are met in respect of a person who has offered to give
10the Department a compensation undertaking, the Department may
accept the undertaking instead of applying, or proceeding with an
application, for a compensation order.

(3) The conditions are that—

(a) the person is subject to a disqualification order or
15disqualification undertaking under this Order, and

(b) conduct for which the person is subject to the order or
undertaking has caused loss to one or more creditors of an
insolvent company of which the person has at any time been
a director.

(4) 20An “insolvent company” is a company that is or has been insolvent
and a company becomes insolvent if—

(a) the company goes into liquidation at a time when its assets
are insufficient for the payment of its debts and other
liabilities and the expenses of the winding up,

(b) 25the company enters administration, or

(c) an administrative receiver of the company is appointed.

(5) The Department may apply for a compensation order at any time
before the end of the period of two years beginning with the date on
which the disqualification order referred to in paragraph (3)(a) was
30made, or the disqualification undertaking referred to in that
paragraph was accepted.

(6) In the case of a person subject to a disqualification order under
Article 11A or 11D, or a disqualification undertaking under Article
11C or 11E, the reference in paragraph (3)(b) to conduct is a reference
35to the conduct of the main transgressor in relation to which the
person has exercised the requisite amount of influence.

19B Amounts payable under compensation orders and undertakings

(1) A compensation order is an order requiring the person against
whom it is made to pay an amount specified in the order—

(a) 40to the Department for the benefit of—

(i) a creditor or creditors specified in the order;

(ii) a class or classes of creditor so specified;

(b) as a contribution to the assets of a company so specified.

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(2) A compensation undertaking is an undertaking to pay an amount
specified in the undertaking—

(a) to the Department for the benefit of—

(i) a creditor or creditors specified in the undertaking;

(ii) 5a class or classes of creditor so specified;

(b) as a contribution to the assets of a company so specified.

(3) When specifying an amount the High Court (in the case of an order)
and the Department (in the case of an undertaking) must in
particular have regard to—

(a) 10the amount of the loss caused;

(b) the nature of the conduct mentioned in Article 19A(3)(b);

(c) whether the person has made any other financial
contribution in recompense for the conduct (whether under a
statutory provision or otherwise).

(4) 15An amount payable by virtue of paragraph (2) under a compensation
undertaking is recoverable as if payable under a court order.

(5) An amount payable under a compensation order or compensation
undertaking is provable as a bankruptcy debt.

19C Variation and revocation of compensation undertakings

(1) 20The High Court may, on the application of a person who is subject to
a compensation undertaking—

(a) reduce the amount payable under the undertaking, or

(b) provide for the undertaking not to have effect.

(2) On the hearing of an application under paragraph (1), the
25Department must appear and call the attention of the Court to any
matters which the Department considers relevant, and may give
evidence or call witnesses.

Amendments consequential on, or related to, amendments made by paragraphs 2 to 8

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

(2) 30In Article 2(2) (interpretation), after the definition of “the official receiver”
insert—

  • ““overseas company” is a company which is incorporated or formed
    outside Northern Ireland;”.

(3) In Article 3 (disqualification orders: general), in paragraph (2), for “Article
359” substitute “Articles 9 and 11A”.

(4) In Article 4 (disqualification undertakings: general)—

(a) in paragraph (1), for “10 and 11” substitute “8A, 10, 11, 11C and 11E”,
and

(b) in paragraph (2), after “10” insert “or 11C”.

(5) 40In Article 5 (disqualification on conviction of offence punishable only on
indictment or either on indictment or summary conviction), after paragraph
(1) insert—

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