Re Tech Textiles Ltd: ChD 1998

A disqualified director sought leave under section 17 to act as a director or be concerned or take part in the management of 3 companies and was successful in respect of 1 company. Arden J looked at the statutory basis and observed that the purpose of the unfitness disqualification is protective rather than penal and addressed the circumstances to which the court should have regard when considering an application for leave by an unfit director. She said: ‘As respects the exercise of the discretion to grant leave there is no express guidance in the statute. It is clearly relevant to the exercise of this discretion to consider the end which disqualification seeks to achieve and the reasons why that end is thought desirable. It is clear, however, from the leading authority of Re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164 that the purpose of s 6 of the 1986 Act is protective rather than penal, and this is the starting point. In practice the section also has a deterrent function since honest directors will not wish their conduct to result in disqualification proceedings . . Leave, however, in my view is not to be too freely given. Legislative policy requires the disqualification of unfit directors to minimise the risk of harm to the public, and the courts must not by granting leave prevent the achievement of this policy objective. Nor would the court wish anyone dealing with the director to be misled as to the gravity with which it views the order that has been made . . To what factors should the court have regard when it is considering the grant of leave? The courts have on many occasions made it clear that they will have regard to two factors in particular : the protection of the public; and the need for the applicant to be a director’.
As to the protection of the public Arden J said: ‘The public for this purpose includes all relevant interest groups, such as shareholders, employees, lenders, customers and other creditors. The process of considering whether the public is adequately protected if leave is given involves considering a number of factors. The court must look at the grounds on which unfitness was found, and in particular whether the applicant had misappropriated any assets or acted knowingly in breach of duty. The court must also have regard to the view that the court took as to the character of the applicant, in particular his honesty, reliability and willingness to accept advice. The previous career of the applicant may also be relevant. Obviously it would also be relevant if he had had a previous disqualification order made against him but that has not been suggested in this case.
As regards the company of which the applicant is to become a director, the court must consider the nature of the company’s business, the size of the company, its financial position, the number of directors, the number of its employees and creditors and so on, and the risks involved in the company’s particular business so far as it can make any assessment of this. It must also look to see whether there is potential for the matters which were held to constitute unfitness to recur’.
Arden J reviewed cases in which safeguarding measures, such as appointment of solicitors or accountants as directors and the imposition of specific controls in order to protect the public and avoid recurrence were considered, and continued: ‘There are also other matters to which the court should in my view have regard. However, this is not in any way a comprehensive list. For instance the court should take into account the director’s conduct since the matters which gave rise to the established grounds occurred, in particular since the proceedings for disqualification were begun. Thus, if he has acted as a director while the proceedings were pending it will be relevant to see whether the companies have carried on business satisfactorily, for instance whether they are trading profitably, have complied with their obligations under the Companies Act or other relevant legislation (such as fiscal legislation) and have paid liabilities as they fall due’.
As to the need for the applicant to be a director, she continued: ‘In this context, ‘need’ has to be interpreted as practical need. There will be companies where the involvement of the applicant in the capacity sought is vital to customer or investor confidence, or for some other sufficient reason’.


Arden J


[1998] 1 BCLC 256


Company Directors Disqualification Act 1986 17


England and Wales


ApprovedRe Moonlight Foods Ltd , Secretary of State for Trade and Industry v Hickling 1996
The Secretary of State, when presenting an application for the disqualification of a company director is obliged to present a balanced picture. ‘It is accepted that these are not ordinary adversarial proceedings but have an element of public . .
CitedIn re Sevenoaks Stationers (Retail) Ltd CA 1990
The court gave guidelines for the periods of disqualification to be applied for company directors under the Act. The maximum period of ten years should be reserved for only the most serious of cases. Periods of two to five years should apply to . .

Cited by:

CitedHarris v Secretary of State for Business, Innovation and Skills ChD 9-Aug-2013
The claimant had offered an undertaking not to act as a company director for a period of time, to avoid applications for his disqualification. He now sought leave to act.
Held: The applicant had: ‘put forward ample evidence to justify a . .
Lists of cited by and citing cases may be incomplete.


Updated: 06 May 2022; Ref: scu.185776