Director disqualification: transparency and accuracy critical for successful section 17 applications

The recent case of Wilson v Secretary of State for Business and Trade [2025] EWCH 691 (Ch) provides a useful reminder that permission to act as a director under section 17 of the Company Directors Disqualification Act 1986 (“CDDA”) is not granted by default and material inaccuracies in the pleadings can be fatal to applications under the same.

Key legislation

The CDDA is the primary legislation which governs the disqualification of company directors in England and I highlight the following key sections in particular:

• Section 1 outlines the general framework of the CDDA
• Section 1A introduces the concept of undertakings, which allows directors to voluntarily agree to disqualification as a director – providing an alternative to formal disqualification proceedings
• Section 2 empowers the court to make a disqualification order against a person who is convicted of an indictable offence which is in connection with the promotion, formation and management of a company
• Section 3 deals with cases where directors have persistently defaulted in relation to their obligations under company legislation i.e. failing to file companies accounts
• Section 6 addresses the disqualification of directors who are “unfit” to be concerned in the management of a company
• Section 7 outlines the procedural process for the Secretary of State to issue a claim to disqualify a director and the time limits for doing so
• Section 11 prevents those who are undischarged bankrupts or who are subject to a debt relief order from acting as directors – indirectly/directly – or being involved in the promotion/formation of a company without leave of the court
• Section 13 confirms the criminal penalties which apply following a person who acts in contravention of a disqualification order, disqualification undertaking or is guilty of an offence under Sections 11/11A
• Section 14 clarifies that body corporates can be held accountable for misconduct, not just individual directors
• Section 15A provides that directors who are disqualified under the CDDA can be held personally liable for all the relevant debts of a company incurred at a time when that person was involved in the management of the company
• Section 17 provides a mechanism by which disqualified directors can apply to the court for their permission to continue acting as a director under certain circumstances.

Case facts

In the case of Wilson, the disqualified director (the “Claimant”) had provided an undertaking on 17 October 2024 not to act as a director for the period of 10.5 years.

Fast forward just over a week, on 29 October 2024, the Claimant applied to the court under section 17 of the CDDA for permission to act as a director of 15 other companies.

At first instance, the court granted interim permission with conditions and adjourned the application to a further hearing. This is not an unusual step for the court to make such an interim order, despite the director’s impending disqualification – which usually begins 21 days after the Secretary of State has accepted the undertaking – and with the purpose of maintaining the status quo and continuity of business and management of the various businesses at the heart of the application.

At the final hearing, when considering whether to grant permission for the Claimant to act as a director, and with direct reference to Rwamba v Secretary of State for Business, Energy and Industrial [2020] EWCH 2778, the court considered the following factors:

• The nature and the seriousness of the conduct which led to the disqualification undertaking was a serious top bracket case which is a relevant circumstance when considering the Claimant’s application for leave
• The structure of the Companies which the Claimant intends to be a director of, leaves HMRC extremely exposed – given that the VAT registered companies have no assets to speak of, HMRC is exposed to the risk of non-recoveries of VAT
• The Claimant failed to persuade the court that there was a need for him to be a director of the relevant companies
• The Claimant breached the conditions of the interim permission and attempted to conceal the same, this impacted the weight attached to the disqualified director’s assurance as to how the risk of breaches would be mitigated by appointing an individual who would oversee matters, given that the breaches happened under their watch in any event
• The Claimant failed to fully cooperate with the Defendant’s reasonable and proportionate requests for information and documentation throughout the course of the proceedings
• The Claimant’s pleadings contained material self-serving inaccuracies which, when the Claimant later attempted to excuse, only served to demonstrate a lack of incompetence, at its best, on the part of the director
• The Claimant failed to be transparent and accurate in their pleadings i.e. failing to identify the correct time that some of the relevant companies had entered into time to pay agreements in relation to VAT and providing HMRC screenshots for some but not all the companies in question.

Unsurprisingly, based on the facts presented, the court was not persuaded to grant the leave sought and noted that there was a material risk to the public of further breaches of the conditions and further corporate misconduct if permission were to be granted.

Therefore, the court dismissed the Claimant’s application for leave.

Key takeaways

• Claimants and their legal advisors should ensure that all applications to court for permission are fully transparent. They should avoid being selective of the information they present where that other information is material in the overall success of the application.
• Claimants should prepare to justify why there is a “need” for them to act as a director in relation to the relevant company. Whilst this is not a precondition, it is usual to establish and will give greater weight to an application where need can be established.