New powers to disqualify company directors

by [anonymous]

OFT has published guidance on Competition Disqualification Orders

The Journal, May 2003, page 60

The OFT has published guidance on Competition Disqualification Orders (CDOs).

The Enterprise Act 2002 amends the Company Directors Disqualification Act 1986 (CDDA) to empower the OFT and certain sectoral regulators to apply to the court for CDOs. Applications for CDOs must be made to the Court of Session.

Before making an application for a CDO, the OFT must give notice to the person concerned and give him or her an opportunity to make representations.

The court must make a CDO against a person if it considers that two conditions are met:

a company of which that person is a director breaches competition law
the court considers that person's conduct as a director makes him or her unfit to be involved in the management of a company.

The maximum period of disqualification under a CDO is 15 years. During the period in which a person is subject to a CDO, it is a criminal offence for him or her to be concerned in the management of a company.

The OFT may, instead of applying for a CDO, accept a Competition Disqualification Undertaking (CDU). A CDU has the same effect as a CDO, but is a binding commitment given to the OFT by the person, rather than an order issued by the court.

The guidance sets out the five-step process the OFT will follow when deciding to apply for a CDO, and describes some of the factors it will take into account when determining whether to apply for a CDO. The guidance makes it clear that the OFT does not consider CDO applications to be appropriate in cases other than those in which a financial penalty has been imposed and, in the event of an appeal, upheld in whole or part. The OFT will be more likely to apply for a CDO against a director where there is evidence that he or she has been actively and directly involved in activities which breach competition law and obstructed any investigation by regulatory bodies or advised others to do so. The guidance includes discussion of mitigating factors which may reduce the likelihood that the OFT will apply for a CDO. These include evidence indicating, for example, that the director contributed to the company taking quick steps to remedy a breach and ensure compliance with competition law.

Penny Boys, OFT Executive Director, said: “The guidance makes clear that the OFT expects all company directors to understand that compliance with competition law is critical, both for their companies, and for assessing an individual's personal fitness to carry out the role of company director.”