#Disqualification of directors — you?

The law:


This law is designed to protect the public interest.

It is not designed to be penal.

If you break the disqualification restrictions the penalty is two years in prison. Very serious stuff.

Your liability is called “strict”, this means if you meet the criteria, you are guilty under law and there is no way out. The words are: “without proof of carelessness or fault.”

So said that, this lower level of proof means it is much easier to be disqualified, for example for failure to keep proper accounting records.


It is always a good idea to read the actual law for your actual self, because you are personally liable for complying with it. You are not protected by the limited liability of your company. This is part of the price of that limited liability.


And within that the clause I draw your attention most directly to is this one:

“to disclose with reasonable accuracy, at any time, the financial position of the company at that time, and”

Because it uses the words “at any time”. Not to mention “with reasonable accuracy”.

To see live examples of why directors have been disqualified see here:


Those are solely in the last three months up to a few days ago.

Maintain the kind of records you are by law required to keep.

Granted do this to keep you informed, but at the same time you are remaining compliant with the requirements of the law as to record keeping. Your decisions must be based on your records.

The records to maintain are specifically designed to monitor in real time your company’s ability to pay its debts as they fall due, which is the definition of being sufficiently solvent to continue rightful trading under law (IA 86).

You could take the view that your records are intended to keep you out of risk of prison.

So you thought bookkeeping wasn’t important?

Think again.

Hello World 40 Years a public accountant.

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