Delinquent directors: An analysis of the objectives and success of section 6 of the Company Directors Disqualification Act 1986

Williams, Richard Lynn. 2005. Delinquent directors: An analysis of the objectives and success of section 6 of the Company Directors Disqualification Act 1986. PhD Thesis, Cardiff University.

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Abstract

This thesis discusses the objectives and success of the disqualification of directors under section 6 of the Company Directors Disqualification Act 1986. Disqualification under that provision is central to the state's strategy for dealing with undesirable conduct by directors. However, the objectives of disqualification under section 6 are unclear and is effectiveness can be contested. It is frequently stated that disqualification exists to 'protect the public and commercial' world from abuse of limited liability yet the precise nature of the harm that such abuse causes has not been conclusively determined. As such, some have argued that disqualification seeks to sanction conduct that is 'socially undesirable'. This thesis set out to establish the nature of the harm that makes certain uses of limited liability undesirable. It argues that the harm the state seeks to eschew through its use of section 6 is conduct likely to result in financial loss to creditors. Consequently it is argued that section 6 exists to control a moral hazard created by the state's policy of allowing entrepreneurs free access to limited liability. Having established that a reduction in financial loss is the objective of section 6, the thesis processes to evaluate whether the section is likely to bring about a benefit (in terms of reduced loss) that is greater than the costs it generates. It is argued that disqualification under section 6 fails to bring about a meaningful reduction in losses generated by 'unfit' directs. However, it is also contended that there are significant costs associated with the application of the sanction. Consequently, the thesis contends that section 6 is an inefficient method of seeking to control undesirable conduct by directors. The thesis concludes that the failure of disqualification to provide effective protection from the moral hazard created by limited liability ought to necessitate a review state's policy of allowing free access to it. For, in so far as regulation exists to protect the public from abuse of limited liability, the state must feel that its policy creates losses that are unacceptable. Therefore the failure of that regulation ought to necessitate a review of the policy as the most desirable way of protecting the public from the harm inflicted by undesirable use of limited liability.

Item Type:	Thesis (PhD)
Status:	Unpublished
Schools:	Law
Subjects:	K Law > K Law (General)
ISBN:	9781303203350
Date of First Compliant Deposit:	30 March 2016
Last Modified:	29 Jun 2023 09:41
URI:	https://orca.cardiff.ac.uk/id/eprint/56026

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