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Technical Skill and Talent May Not Make You a Competent Company Director

Company directors must have a real understanding of their financial responsibilities and no amount of practical talent or technical skill necessarily qualifies you for the role. The High Court made that point in the case of a specialist aviation engineer whose company collapsed into insolvency.

The man enjoyed a worldwide reputation for excellence in his field. However, in the management of his company, he displayed a marked lack of financial acumen and experience. After the company went into liquidation with substantial debts, the Secretary of State for Business, Energy and Industrial Strategy launched an investigation into his stewardship of it.

Faced with the threat of proceedings under the Company Directors Disqualification Act 1986, he gave a formal undertaking that, for a period of three and half years, he would not serve as a company director, or be in any way concerned or take part in the promotion or management of a company, without judicial permission.

In applying for such permission, he argued that he should be permitted to remain as a director of two other companies. He asserted that his unique knowledge, contacts and experience were essential to the companies’ success and that their clients would expect to deal with a director rather than merely an employee.

Granting the permission sought, the Court noted that there was no suggestion that he had behaved dishonestly. His former company had failed simply because he was not sufficiently competent in financial management. The permission was subject to a number of safeguards, including that the companies employ an experienced finance director and engage the services of a reputable accountancy firm.

Published in
31 May 2021
Last Updated
15 June 2021