Bradford Councillor Imdad Hussain has been suspended for two years by the Labour Party after it found he failed to disclose he had been banned as a company director.
An investigation by the party at a national level has concluded he breached party rules.
Coun Hussain will not now be allowed to stand as a Labour candidate when his seat on Bradford Council comes up for re-election in 2014. The 42-year-old councillor continues to sit as an independent in the Heaton ward.
Coun Hussain was disqualified as a company director for seven years after his company went into liquidation last year. Earlier this year he was suspended by the Labour Party while national party officials began an investigation into his business dealings.
Yesterday a Labour Party spokeman said: “Following a detailed investigation, a Labour Party panel has concluded that Mr Hussain did breach party rules by failing to disclose information about his business activities when he stood for selection to become a Labour candidate.