the Secretary of State for Business, Energy And Industrial Strategy v Geoghegan & Ors

All members of a limited liability partnership may potentially face disqualification proceedings under the Company Directors Disqualification Act 1986, as applied by the Limited Liability Partnership Regulations 2001. The jurisdiction is not confined to members of a management board or those equivalent to company directors.

Conduct as a member means conduct in that capacity. It is not limited to conduct forming part of the LLP’s central management. The court must instead assess whether the specified conduct, viewed cumulatively and in the context of the individual’s actual role and responsibilities, makes the person unfit to be concerned in the management of an LLP or company.

The Secretary of State brought disqualification proceedings under section 6 of the Company Directors Disqualification Act 1986 against members of Bell Pottinger LLP following the LLP’s insolvency. The Applicants sought strike-out or summary judgment.

The Applicants were not members of the LLP’s Management Board. They argued that the proceedings could not concern them because the allegation related only to their conduct of a particular client campaign, rather than the central management of the LLP. The central issue was whether the statutory scheme limited disqualification proceedings to members involved in management at board level.

1. Applications dismissed. The Applicants’ applications for strike-out and summary judgment were dismissed.
2. Regulation 4(2) of the Limited Liability Partnership Regulations 2001 applies the Company Directors Disqualification Act 1986 to LLPs by substituting, among other things, “member” for “director”. The statutory language does not confine the jurisdiction to members of a management board or to members occupying a position equivalent to a company director.
3. “Conduct as a director” in section 6 refers to the capacity in which the person acted. It is distinct from the separate question whether that conduct makes the person unfit to be concerned in management. The same construction applies to “conduct as a member” of an LLP.
4. The test for unfitness is whether the conduct specified by the Secretary of State, assessed cumulatively and with any extenuating circumstances, falls below the standards of probity and competence appropriate for fit directors or members. The assessment must be made in the context of the individual’s actual role, duties and responsibilities. Relevant incompetence may occur at any level of management.
5. The court rejected the proposed distinction between central management and other business activity. Conduct concerning a particular client or aspect of an LLP’s business may be relevant, including dishonesty, even if it does not concern the central direction of the LLP.
6. The statutory scheme contains safeguards, including the Secretary of State’s public-interest requirement under section 7. The absence of a management role may be relevant to the ultimate unfitness assessment, but does not remove jurisdiction to bring proceedings.
7. The Applicants’ actual roles and responsibilities, and whether the alleged conduct was proved and established unfitness, remained matters for trial.

not stated in the judgment.