If you have been disqualified from acting as a company director, you may be left with questions about what you can still do in a business setting - especially when it comes to owning shares.

The short answer is that disqualification does not automatically stop you from being a shareholder. However, if your position as a shareholder leads to you being shown to have an influence on how the company is run, you could be accused of committing a criminal offence.

In this blog, we explain what disqualified directors are and are not allowed to do when it comes to holding shares, and the legal risks if you cross the line into company management.

Understanding Director Disqualification

Director disqualification is a legal restriction placed on an individual, usually following misconduct, insolvency proceedings or a criminal conviction. A person can be disqualified under the Company Directors Disqualification Act 1986. This applies to directors of UK-registered companies, as well as those involved in managing a business overseas under certain circumstances.

The disqualification process is typically led by the Insolvency Service, with disqualifications also possible through court proceedings or investigations by regulatory authorities such as the Competition and Markets Authority (CMA) or Financial Conduct Authority (FCA). The court may grant a disqualification order where a person is found unfit to act as a director - this could include serious failures in financial management, unfit conduct, allowing a company to trade while insolvent, or failing to keep proper company accounting records.

Disqualification orders usually can be for a period of between two and fifteen years. During this time, the individual must not act as a director of a company or be involved in its management unless the court grants permission.

Can a Disqualified Director Be a Shareholder?

You can still be a shareholder in a company if you are disqualified from being a director. Holding shares is treated as a property right and is separate from the duties and responsibilities of running a company.

While it is lawful to retain or acquire shares, there are strict limits on what you can do with them during your disqualification period. In particular, legal consequences will be triggered by any actions where a shareholder may be seen to:

• Exercise control over company decisions
• Instruct other directors on how to act
• Represent the company to clients, customers or suppliers
• Access company finances or approve spending
• Make hiring or firing decisions

Doing any of the above could lead to a finding that you are involved in the management of a company and are acting as a de facto director. This may amount to a breach of your disqualification order, because you are not allowed to act in any directorial capacity - official or unofficial.

If that happens, you could be prosecuted and - if found guilty - face a fine, imprisonment or both. You could also be held personally liable for company debts if the business enters insolvency.

Can a Disqualified Director Form a Limited Liability Partnership?

The restrictions placed on disqualified directors apply broadly and are not limited to private limited companies.

If you are involved in a limited liability partnership (LLP), disqualification may also prevent you from acting as a member - especially as a designated member responsible for managing the LLP’s affairs. Acting in this capacity without the court’s permission is a criminal offence under the Company Directors Disqualification Act 1986.

Being disqualified in the UK can also affect your ability to act in an overseas company, particularly where that company trades in the UK or is linked to a UK-registered business. Disqualified individuals who use overseas structures to try to bypass UK restrictions may still be at risk of prosecution or enforcement action.

Why This Matters

A director disqualification order is more than a technical restriction. It carries serious legal consequences and can have lasting personal and financial effects.

If you act in breach of your order, you could face:

• A criminal record or prosecution
• Imprisonment or a fine
• Personal liability for company losses
• Disqualification for a longer period
• Further investigation by Companies House, the Insolvency Service or police authorities

Understanding where the line is, and staying on the right side of it, is essential to protecting yourself.

How JMW Can Help

If you are facing director disqualification proceedings, have been accused of acting while disqualified, or are unsure about your legal position as a shareholder, we can help.

Our experienced director disqualification solicitors advise clients on the full range of issues arising from director disqualification, including:

• Defending disqualification proceedings
• Advising on your responsibilities and restrictions
• Applying to court for permission to act in certain roles
• Representing you court proceedings

We provide clear advice and robust representation to help you meet your legal obligations and protect your position.