Friday 5 April 2019

UK: Scotland: leave to act as a director while disqualified

Section 17 of the Company Directors Disqualification Act 1986 provides that an individual disqualifed from acting as a director may nevertheless seek the court's leave to act as a director. In a recent Scottish decision - Re Joseph Meng Loong Lee [2019] ScotSC 27, available here (pdf) - Sheriff Peter J. Braid granted leave for a disqualified director to act as a director of six companies. This number makes the decision unusual (leave had originally been sought to act in respect of 13 companies). The decision is also worth noting because of the discussion it contains about enforcement and, in particular, the lack of monitoring in respect of any conditions that are imposed as part of the grant of leave. In this regard, Sheriff Braid stated (para. [28]):
.... while the undertakings and conditions appear stringent, there is in fact no means of policing them. The pursuer is willing to undertake to comply with the conditions but it seems to me that does not add anything because he requires to comply with the order of the court in any event. While it is the Secretary of State who suggested the conditions, he has no intention of monitoring compliance, and to that extent the insistence on conditions may on one view be seen as something of a cosmetic exercise, with no teeth attached in the event of non compliance. ... it was previously the Secretary of State’s practice to ask the court to include in any order granting leave, a formula of words to the effect that in the event of any of the conditions attached to the order being breached, the permission granted by the court would immediately cease. However, Lady Wolffe declined to approve such wording in Buckley v Secretary of State for Business, Energy and Industrial Strategy [2017] CSOH 105 on the grounds that it would lead to uncertainty.  I respectfully agree with that approach, and the Secretary of State no longer requests that such wording be inserted into any interlocutor, but the consequence of that is that one possible theoretical safeguard which may have existed if such wording had been adopted, is no longer there.  The fact is that the effect of a breach of any of the conditions remains unclear". 

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