Former health minister Michael Wooldridge has been banned as a company director for more than two years but escaped harsher punishment over his role in collapsed retirement village scheme Prime Trust.
The penalty was handed down on Tuesday in a judgment against five directors of the failed $500 million scheme.
Other directors, including founder Bill Lewski, received longer bans, with Mr Lewski's lasting 15 years - the most of any of the scheme's directors.
Mr Lewski, who facilitated a lucrative $33 million payment for his own financial benefit before the scheme's collapse, was described as the "most culpable of directors by far" by Justice Bernard Murphy, who said he "instigated and orchestrated" the fee at the expense of unit holders.
The $33 million has never been repaid.
The ban handed down to Dr Wooldridge will force him to step down from two ASX-listed boards, including Australian Pharmaceuticals Industries (API), the company that owns Priceline and Soul Pattinson chemist chains, and the Vision Eye Institute.
API told the market last week that Dr Wooldridge was planning to retire effective December 31 but was not able to say on Tuesday whether he would be forced to step down earlier.
In a statement, Dr Wooldridge said he "regretted any actions which may have contributed to a loss to unit holders of the Prime Trust" and intended to appeal the judgment.
Other directors Mark Butler and Kim Jaques received four-year bans for breaches for their role in the scheme, however former director and Liberal Party stalwart Peter Clarke avoided disqualification.
Mr Clarke, who in July admitted giving untrue evidence under oath, was deemed less culpable, despite Justice Murphy saying he "sat passively" during crucial meetings and "merely waved through a resolution which allowed a $33 million breach of trust".
"Such conduct is beyond mere inadvertence or carelessness," Justice Murphy said.
The corporate regulator had called for a lifetime ban for Mr Lewski, who was also fined $230,000. The other directors, including Mr Clarke, were fined $20,000.
Australian Securities and Investments Commission commissioner Greg Tanzer said the directors, through their actions, showed a "complete disregard for the unit holders of Prime Trust to which they owed important obligations".
However he said Dr Wooldridge's contribution to public life and reputational damage warranted a less severe punishment.
Investor Steve O'Reilly of the Prime Trust Action Group said investors felt vindicated by the judgment, however they had hoped for longer bans, particularly for Dr Wooldridge.
"We had always argued, as had ASIC, that he was the second most culpable given he was the chairman of the board," he said.
Mr O'Reilly said the judgment sent a strong message to directors to meet their obligations.
"If you don't meet that obligation, you might find your reputation is in tatters and you're disqualified from acting as a company director," he said.
Prime Trust was a managed investment scheme with more than $560 million in funds under management before it collapsed in 2010.
The $33 million "fee", paid in 2007 to list on the stock exchange, was at the centre of the Federal Court case, with the court finding it came at the expense of unit holders.
The directors have until December 23 to lodge an appeal to the Federal Court.