Mrs Justice Proudman, sitting in the High Court, gave judgment last week in Secretary of State for Business, Innovation and Skills v Aaron & Ors [2009] EWHC 3263 (Ch). The case concerned a successful application by the Secretary of State for the disqualification of two directors under Section 7 of the Company Directors Disqualification Act (1986). It was argued on the directors' behalf that disqualification would be unfair because their breaches of FSA rules - on which the Secretary of State based his case - were unrelated to the general management of the company. The trial judge rejected this argument, observing (at paras. [102] - [103], italics in the original):
The fact that he [the director] has not shown himself unfit to manage any business, or to undertake a different management role, is, like the likelihood or otherwise of offending again ... a matter which goes to leave to be concerned in the management of a company under s. 17 CDDA and to length of disqualification. It is not a matter which goes to disqualification itself. Secondly, there is the simple fact that the abnegation of responsibility by a director is a matter affecting the ability to conduct ordinary corporate governance. A director's failure to ensure that he was sufficiently concerned with relevant responsibilities is a grass roots failure".
Mrs Justice Proudman also accepted the submission, made on behalf of the Secretary of State, that:
... in the case of a FSMA authorised company a director's duty to that company to exercise reasonable care skill and diligence extends to taking all reasonable steps to ensure that the company complies with its regulatory obligations" (para. [9]).
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