Versions

 

Matters for determining unfitness of directors

7.10 Where the Registrar determines whether a person’s conduct as a director makes them unfit to be concerned in the management of a company, the Registrar must have regard to the matters mentioned in Part I of Schedule 2 of CR 2020. These include:
a. any misfeasance or breach of any fiduciary or other duty by the director in relation to the company, including any breach of the general duties of directors owed to the company (misfeasance examples are provided in Table 2, below);2
Table 2 – examples of misfeasance
By way of example, misfeasance includes, but is not limited to:
the misapplication of funds or company property – such as:
Preferential payments
Transactions at an undervalue
Concealing or removing company assets with a view to putting them out of reach of creditors, so their returns from the liquidation are diminished
Taking an excessive salary when the company is in difficulty and cannot support it, the improper payment of dividends, or unauthorised loans to directors
continuing to trade to the detriment of creditors when a company is insolvent
fraudulent behavior
the failure to cooperate with an insolvency practitioner
turning a “blind eye” to the misconduct of others under the supervision or control of the director
b. any misapplication or retention by the director of, or any conduct by the director giving rise to an obligation to account for, any money or other property of the company;
c. the extent of the director's responsibility for any failure by the company to comply with any of the following sections of CR 2020:
i. 118 (register of members);
ii. 119 (register to be kept available for inspection);
iii. 153 (register of directors);
iv. 156 (register of directors' residential addresses);
v. 157 (duty to notify Registrar of changes: directors);
vi. 292 (duty to keep register of secretaries);
vii. 293 (duty to notify Registrar of changes: secretaries);
viii. 375 (duty to keep accounting records);
ix. 377 (where and for how long accounting records to be kept);
x. 770 (treatment of development costs);
xi. 798 (instruments creating charges to be available for inspection); and
d. the extent of the director's responsibility for any failure by the directors of the company to comply with sections 383 or 389 (duty to prepare annual accounts), 399 or 404 (approval and signature of accounts) and 409 (name of signatory to be stated in published copy of accounts).
7.11 Where the company has become insolvent, the Registrar must have regard to the matters mentioned in Part II of Schedule 2 of CR 2020. These include:
a. the extent of the director's responsibility for the causes of the company becoming insolvent;
b. the extent of the director's responsibility for any failure by the company to supply any goods or services;
c. the extent of the director's responsibility for the company entering into any transaction or giving any preference falling within under Part 4 (protection of assets in liquidation and administration) of the Insolvency Regulations 2015;
d. the extent of the director's responsibility for any failure by the directors of the company to comply with section 186(1)(a) (meetings of members and creditors) of the Insolvency Regulations 2015; and
e. any failure by the director to comply with any obligation imposed under any of those sections of the Insolvency Regulations 2015 that relate to:
i. the statement of company’s affairs (sections 51, 165 and 231);
ii. meetings of members and creditors (section 186(2));
iii. getting in of the company’s property (section 254); or
iv. the duty to co-operate with an office-holder (section 255).

Further guidance on directors’ duties will be available on the Registration Authority’s website from time to time (www.adgm.com)