What is director disqualification?
Recent announcements by the Competition and Markets Authority (CMA) have highlighted that directors who are found to have broken competition law can face serious personal risk – in addition to the fines and sanctions taken against the company, directors can be disqualified and banned from acting as a director for up to 15 years.
In April, two directors were disqualified for a combined total of 14 years for their part in a business cartel, and soon after in early May another 3 disqualifications were announced – both of these announcements related to the construction sector.
In February, we announced that for the first time we were applying to the courts to disqualify 2 remaining directors in an estate agents price fixing cartel case, having already secured the disqualification of another 2. One director has since agreed to the disqualification and our case against the remaining director is on-going.
As these announcements highlight, the risk of getting caught breaking the law through anti-competitive (including cartel) behaviour is particularly serious for directors. And there have been recent changes to how the CMA goes about securing disqualifications. We have streamlined the process and we now consider whether to pursue director disqualification in every case where competition law has been broken, which has led to more cases.
Implications for directors
Company directors have a special responsibility to be well-informed about the goings on in their business and it’s not just those who were actively involved in breaking the law that are at risk of disqualification. If directors cover up or turn a blind eye to wrongdoing, or are not vigilant when they should know about and put a stop to illegal activity, they can also be at risk of disqualification.
So, what should businesses do?
We know that most people and businesses want to do the right thing, but don’t necessarily understand competition law – just 18% of those polled said their business had senior level discussions about it, trailing far behind health & safety and employment law.
For trade associations, understanding competition law will help you promote compliance amongst your members and make sure the work you do bringing businesses together stays on the right side of the law.
The CMA has a number of resources that help businesses and business owners understand what competition law means for them, and how to comply, including a quick guide on how to avoid disqualification, a checklist on how to comply with competition law and multiple resources on the StopCartels campaign page.
If you do think you have seen – or been involved – in anything that breaks the law, the best thing is to be safe, not sorry, and report it to the CMA straight away. If in doubt always seek independent legal advice.
The CMA can offer leniency to individuals and businesses that cooperate with their investigation. The first company to come forward can benefit from fuller leniency: current and former directors are guaranteed immunity from disqualification, provided they fully cooperate with the CMA’s investigation.
For further info on how to identify and report a cartel and adv