GUIDES
By InsidEntity Editorial Desk · Sep 25, 2026 · 14 min read
Who can be barred from serving as a director in the US, which body does the barring, and how long each bar lasts.
The United States has no single director-disqualification statute, and nothing like South Africa’s national grounds for delinquency or its central register of delinquent directors. Instead, the power to bar someone from a board sits in three overlapping layers: state corporate law, federal securities enforcement by the Securities and Exchange Commission (SEC) and the courts, and sector regulators for banks, funds and insurers.
Whether a person can be stopped from serving depends on where the company is incorporated, whether it is publicly listed, and whether it operates in a regulated industry.
State law: few eligibility rules, and removal is mostly for shareholders
Companies in the US are incorporated under state law, and state statutes set very few eligibility requirements for directors. Delaware, home to most large US listed companies, requires directors to be natural persons, so a company cannot sit on another company’s board. Beyond that, qualifications are left to each company’s certificate of incorporation and bylaws. Unlike South Africa, being an unrehabilitated insolvent does not by itself stop a person from serving.
Removing a sitting director is ordinarily a shareholder decision. Under section 141(k) of the Delaware General Corporation Law (DGCL), shareholders generally have the power to remove directors, subject to exceptions in the statute and the company’s charter. Where the board is classified, removal is generally permitted only for cause.
Courts can intervene, but narrowly:
- Delaware, section 225(c). The Court of Chancery may remove a director who has been convicted of a felony connected to their duties to the company, or found by a court to have breached the duty of loyalty. The application may be brought by the company, or derivatively on its behalf by a shareholder. The court must also find the director did not act in good faith and that removal is needed to avoid irreparable harm.
- Model Business Corporation Act (MBCA), section 8.09. The MBCA, adopted in whole or substantial part by 36 US jurisdictions, lets a court remove a director for fraudulent or dishonest conduct or gross abuse of authority (later versions also cover intentionally harming the company), where removal is in the company’s best interest. The court may also bar the person from re-election for a period it sets. Some states cap that period; Arizona, for example, limits it to five years.
Neither route is automatic, and both apply only to the board of the company concerned. A director removed from one board is not, by that fact alone, barred from joining another.
The SEC officer-and-director bar: the closest thing to delinquency
The nearest US equivalent to a South African delinquency order is the officer-and-director bar. It prohibits a person from serving as an officer or director of any issuer with securities registered under section 12 of the Exchange Act, or required to file reports under section 15(d). In practice, that reaches SEC-reporting issuers, not every US company. That reach across companies is what makes it comparable to delinquency.
There are two routes to a bar:
- Through a federal court. Section 21(d)(2) of the Securities Exchange Act of 1934 (and section 20(e) of the Securities Act of 1933) lets a court bar a person who violated the anti-fraud provisions, such as section 10(b), if their conduct shows unfitness to serve.
- Through the SEC itself. Since the Sarbanes-Oxley Act of 2002, section 21C(f) of the Exchange Act (and section 8A(f) of the Securities Act) allows the SEC to impose a bar in its own administrative cease-and-desist proceedings, without going to court. Before 2002, a bar required a federal court order.
The statutory standard is unfitness to serve. Sarbanes-Oxley lowered it from the earlier “substantial unfitness” standard. Courts commonly consider the six non-exclusive factors from SEC v. Patel (2d Cir. 1995): how egregious the violation was, whether the person is a repeat offender, their role when the fraud occurred, their degree of scienter (intent), their economic stake, and the likelihood of repeat misconduct.
Unlike a South African delinquency declaration, a bar is discretionary. A court or the SEC may impose one once the violation is proven, but is never obliged to. Many bars are agreed in settlements, where the person consents without admitting or denying the findings.
Courts have been more willing to tailor the outcome. Some defendants use a bifurcated settlement: they agree to everything except the bar and leave that question to a judge. In SEC v. Competitive Technologies, former chief executive Frank McPike consented in 2007 to an injunction and a $60,000 civil penalty, with the bar left open. In April 2008 the court ruled that no bar was warranted, finding he had no prior violations, chose not to profit from the scheme, and was very unlikely to reoffend. (SEC Litigation Release No. 20692)
A case in point: Martha Stewart’s five-year bar
Martha Stewart’s case shows how an officer-and-director bar works in practice, and how it differs from a criminal outcome.
In June 2003 the SEC sued Stewart in federal court, alleging insider trading in her December 2001 sale of ImClone Systems shares. She resigned as chair and chief executive of Martha Stewart Living Omnimedia that month, after being indicted. In March 2004 she was convicted of lying to federal investigators about the sale. She was never criminally convicted of insider trading.
The SEC’s civil case settled in August 2006. Stewart agreed to a permanent injunction and paid about $195,000 in total: $45,673 in losses she avoided, $12,389 in interest, and a $137,019 civil penalty, the maximum of three times the losses avoided. She also agreed to:
- a five-year bar from serving as a director of any public company
- a five-year limit on her role as an officer or employee of a public company, keeping her out of financial reporting, disclosure, internal controls, audits and SEC filings
Three points stand out. The director bar was fixed-term, not permanent. Separately, the officer restriction limited the functions she could perform rather than barring her from the role outright. The bar arose from a negotiated SEC settlement, entered as a court judgment to which she consented without admitting or denying the allegations, rather than a judicial finding after a contested trial. (SEC Litigation Release No. 19794; SEC press release 2006-134)
Statutory disqualifications: strongest in regulated industries
The US does have statutory disqualifications that apply without a separate, discretionary bar application. They are concentrated in sectors where Congress decided the public needs extra protection. In these industries a conviction or order triggers the restriction by law.
- Banks: section 19 of the Federal Deposit Insurance Act (12 U.S.C. 1829). A person convicted of a crime involving dishonesty, breach of trust or money laundering may not become or remain an institution-affiliated party of an FDIC-insured bank (a director, officer or employee, for example), own or control one, or otherwise take part in its affairs without the FDIC’s prior written consent. The bank itself must not allow it. The Fair Hiring in Banking Act of 2022 narrowed this by excluding certain older or lesser offences, for example where seven years have passed since the offence, or five years since release from prison. Specified federal financial crimes remain subject to a statutory ten-year prohibition.
- Investment funds: section 9(a) of the Investment Company Act of 1940. A person convicted within the past ten years of a securities-related felony or misdemeanour, or subject to a securities-related injunction, may not serve as a director or officer of a registered investment company, such as a mutual fund. The SEC can grant exemptions under section 9(c).
- Insurance: 18 U.S.C. 1033(e). A person convicted of a felony involving dishonesty or breach of trust may not engage or participate in the business of insurance affecting interstate commerce without written consent from the insurance regulatory official authorised to regulate the insurer. The statute’s definition of the business of insurance covers the work of an insurer’s officers and directors.
- Banks: removal and prohibition orders (12 U.S.C. 1818(e)). Separately, federal banking regulators can remove a director and prohibit them from participating in the affairs of insured institutions, for misconduct such as breach of fiduciary duty involving personal dishonesty.
To make a removal order, the regulator must show misconduct (a breach of law or a final order, an unsafe or unsound practice, or a breach of fiduciary duty), an effect (loss or likely loss to the bank, prejudice to depositors, or a gain to the person) and culpability (personal dishonesty, or wilful or continuing disregard for the bank’s safety and soundness).
Once made, the order bars the person from the affairs of any insured bank, bank holding company, insured credit union and certain other institutions (section 1818(e)(7)). Under section 1818(g), a regulator can also suspend a person as soon as they are charged with a crime involving dishonesty or breach of trust, before any conviction.
Historical enforcement data suggest the power has been used sparingly, and mostly against junior staff. A study of Federal Reserve removal orders by Da Lin and Lev Menand found an average of 7.2 actions a year between 1980 and 2019. Most targeted rank-and-file employees for conduct such as embezzlement, and 91% applied to people who had already left the bank. In the two decades before their 2021 study, the Fed did not remove a single senior executive of a major US bank. (Da Lin and Lev Menand, “The Banker Removal Power”, Virginia Law Review)
How long each bar lasts
There is no single US timeline equivalent to South Africa’s lifetime or seven-year minimum delinquency periods. Duration depends on the route.
| Route | Who imposes it | Reach | Duration |
|---|---|---|---|
| SEC officer-and-director bar | Federal court or the SEC | SEC-reporting issuers | Permanent or a set period, conditional or unconditional, at the decision-maker’s discretion |
| Bank prohibition order (12 U.S.C. 1818(e)) | OCC, Federal Reserve or FDIC | Insured banks, credit unions and the other institutions the statute covers | Until terminated, modified or lifted under the order’s terms or by the agency |
| FDIA section 19 | By statute, on conviction | FDIC-insured banks | Until FDIC consent is obtained, unless a statutory exclusion takes the conviction outside section 19; a statutory ten-year prohibition for specified federal offences |
| Investment Company Act section 9(a) | By statute, on conviction or injunction | Registered investment companies | Ten years from conviction, or while the injunction is in force, unless the SEC grants an exemption |
| Judicial removal (MBCA section 8.09 states) | State court | The company concerned | Re-election bar for a period the court sets, capped in some states |
| Judicial removal (Delaware section 225(c)) | Court of Chancery | The company concerned | Removal from office; no statutory re-election bar |
Permanent SEC bars are available and are imposed in some serious fraud cases. Courts and the SEC also impose fixed-term bars where the misconduct was less egregious or the person was unlikely to reoffend.
Disclosure: the record exists, but it is scattered
Public reporting companies must disclose specified legal proceedings involving their directors, nominees and executive officers. Item 401(f) of SEC Regulation S-K requires proxy statements and annual reports to disclose certain events in the past ten years that are material to judging a director’s ability or integrity. These can include:
- bankruptcy filings by the director, or by a company where they were an executive officer
- criminal convictions and pending criminal proceedings
- court or regulatory orders barring them from securities, banking or insurance activity
- findings that they violated securities or commodities law
What the US lacks is a single place to check. That follows from the system’s design: companies are chartered by the states, not the federal government, so there is no national companies register to attach a director register to. South Africa’s CIPC keeps a register of delinquent and probationary directors. In the US, the same information sits across SEC litigation releases and administrative proceedings, each banking regulator’s enforcement database, state court records and the company’s own filings. A bar recorded in one of these will not necessarily surface in another. The information exists; it is spread across legal regimes rather than held in one director register.
Where to find the records
Checking a US director’s history means searching several places. Start with the SEC, then work outwards by sector.
| Source | What it holds | Where |
|---|---|---|
| SEC Action Lookup, Individuals (SALI) | SEC actions against a named person, searchable by name | sec.gov |
| SEC litigation releases | Federal court cases brought by the SEC, including court-ordered officer-and-director bars | sec.gov |
| SEC administrative proceedings | Bars and orders the SEC imposes itself, including under section 21C(f) | sec.gov |
| EDGAR full-text search | Proxy statements and annual reports, where Item 401(f) legal history is disclosed | sec.gov/edgar |
| PACER | Federal court dockets and judgments, including SEC civil cases (fee-based) | pacer.uscourts.gov |
| OCC enforcement actions | Removal and prohibition orders and section 1829 prohibition notices for national banks | apps.occ.gov |
| Federal Reserve enforcement actions | Orders involving state member banks and bank holding companies | federalreserve.gov |
| FDIC enforcement decisions and orders | Orders involving state non-member banks | orders.fdic.gov |
| FINRA BrokerCheck | Industry bars and disclosures, only for people who are or were registered brokers | brokercheck.finra.org |
State court removals under DGCL section 225(c), MBCA section 8.09 or similar provisions have no national database. They have to be searched through each state’s court system.
Two cautions. Regulators note that published orders may not reflect whether an order has since been modified or lifted, so check its current status. And the OCC’s list of section 1829 prohibition notices only runs from December 2022, after the Fair Hiring in Banking Act changed the rules.
One more distinction. FINRA’s BrokerCheck is a separate securities-industry record. A FINRA bar stops a person associating with a broker-dealer, but it is not the same restriction as an SEC officer-and-director bar, and does not by itself keep anyone off a company board.
Three things follow for anyone checking a director:
- A clean SEC record is not a clean record. It says nothing about state court removals, bank prohibitions or insurance restrictions.
- A settled bar is still a bar. It binds even when the person neither admitted nor denied the allegations, and it is among the events Item 401(f) can require a company to disclose.
- Absence from a database is not proof of a clean history. Several databases have start dates, and published orders may not show later changes.
Why this is a genuine governance signal, not just a legal technicality
An officer-and-director bar, a bank prohibition order or a court removal produces a formal legal record. Each one reflects formal action by a court, the SEC or a banking regulator under the legal standard for that proceeding, even where it was settled without admissions. That makes it materially different from reputational commentary or unproven allegation.
The fragmentation of the US system makes that history harder to follow. A bar recorded by one regulator may never appear on the governance page of a company the person joins later, particularly a private company or one outside the regulated sectors.
Disqualification is one of several risks directors carry, alongside personal liability, criminal prosecution and compensation orders, set out on InsidEntity’s directors risks page. For how the same question works under a single national regime, see director disqualification in South Africa.
InsidEntity’s Company Risk Rating scores director capacity from each director’s board seats and experience, and director independence from their ties to the company. A disqualification or bar is not itself a scoring input, and the rating is not a legal determination of whether anyone may serve as a director. The full methodology explains how each pillar is scored. Search a director to check their board history before assuming a clean slate.
Independent research. Not financial advice. This is general information, not legal advice, and does not account for the specific facts of any situation. No allegation of wrongdoing is made against any individual or entity named.
Know more. Risk less. Decide better.
Sources
- Securities Exchange Act of 1934, sections 21(d)(2) and 21C(f): 15 U.S.C. 78u; Securities Act of 1933, sections 20(e) and 8A(f)
- Sarbanes-Oxley Act of 2002, sections 305 and 1105
- SEC v. Patel, 61 F.3d 137 (2d Cir. 1995)
- Delaware General Corporation Law, sections 141 and 225(c)
- Arizona Revised Statutes 10-809
- Federal Deposit Insurance Act, section 19 (12 U.S.C. 1829), as amended by the Fair Hiring in Banking Act: FDIC final rule, Federal Register, Aug 2024; 12 U.S.C. 1818(e)
- Investment Company Act of 1940, section 9: 15 U.S.C. 80a-9
- 18 U.S.C. 1033(e); SEC Regulation S-K, Item 401(f)
- SEC v. Martha Stewart and Peter Bacanovic, 03 Civ. 4070 (S.D.N.Y.): SEC Litigation Release No. 19794, Aug 7, 2006; SEC press release 2006-134
- SEC v. Competitive Technologies, Inc. et al. (D. Conn. 3:04-cv-1331): SEC Litigation Release No. 20692
- Record search pages: SEC Action Lookup, Individuals; OCC enforcement actions search; FFIEC list of regulator enforcement pages
- Da Lin and Lev Menand, “The Banker Removal Power”, Virginia Law Review
- Model Business Corporation Act, current version (as of June 6, 2026)
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