Businessman wins appeal against disqualification as a director

A businessman has won his appeal against his disqualification from being a company director.

Sam Lyon Associate Solicitor and Head of Corporate & Commercial reports.

Gabriel Gatheru Rwamba had been disqualified in 2009 for four years for failing to appropriately monitor the company’s finances.

In 2010, interim orders permitting him to act as a director subject to various conditions were made. He breached that permission by failing to ensure the timely payment of VAT and was disqualified for a second time in 2015.

The consequent undertakings were due to expire in May 2021. A judge noted the short period of the proposed permission and acknowledged that Mr Rwamba had recognised his earlier errors and that they did not involve dishonesty, that the secretary of state did not oppose leave and the absence of risk of further breach.

However, he concluded that he had fallen short of meeting the concerns about wider public protection, especially considering his breach of earlier leave conditions.

The Business and Property Court has overturned that decision.

It held that the decision whether to allow a person who had been disqualified as a director to be concerned with the promotion, formation or management of a company was discretionary.

The judge at the original hearing had highlighted the deterrence aspects of disqualification. However, he had been wrong to think that deterrence had special weight merely because the disqualification had been for breach of the conditions of an earlier order.

Where an applicant had breached earlier conditions, been disqualified as a result, and again sought leave, a court would naturally wish to satisfy itself that there was no material risk of breach of the second leave order. Once it was so satisfied, the case was the same as any other application for leave.

Here, Rwamba had breached the earlier order carelessly but not dishonestly and had apologised and offered conditions imposing stringent controls on the business. The court was satisfied that there was no material risk to the public of future breaches.

Rwamba’s companies were solvent and trading profitably. The current director wished to spend less time in the companies and they would have a better chance of raising funding and growing their business if they were owner-managed.

If you would like more information about the issues raised in this article or any aspect of company law please contact Sam on 01228 516634.