The sole director of the Cardiff Restaurant Company Limited (CRC) has been served with a six-year disqualification by the High Court for failing to act in the best interests of his creditors, particular Her Majesty’s Revenue & Customs.
Simon Geoffrey Kealy was handed the disqualification on 29 August, preventing him from becoming directly or indirectly involved in the promotion, formation or management of a UK company. The disqualification commenced on 19 September 2014.
Breach of duties to creditors
The case centred on the continued accumulation of liabilities incurred during the ongoing trading of the company. The result was that the creditors were left to bear all the risk of the company’s trading, breaching Mr Kealy’s duties both to trade creditors and HMRC.
The Insolvency Service investigation found that Mr Kealy failed to take the necessary steps to ensure the Cardiff Restaurant Company complied with statutory obligations to submit Value Added Tax (VAT) returns to HMRC. He also failed to make the appropriate VAT, Pay As You Earn and National Insurance Contributions for the period 30 September 2010 to 11 April 2012.
It was also found that Mr Kealy continued to trade, despite knowledge of his company insolvency, creating unreasonable risk and a further detriment to creditors. From 20 October 2011 to 11 April 2012, Cardiff Restaurant Company generated further creditor losses of at least £17,695.
The investigation’s key findings
The Cardiff Restaurant Company registered for VAT with effect from 1 July 2010. A VAT return for the period in August 2010 for £2,620 was submitted on 7 October 2010. However, following this initial payment, no further VAT returns were submitted by the company. Subsequently, the return for the period November 2010 became overdue after 31 December 2010.
As a result of the company’s failure to submit their VAT returns, HMRC raised central assessments for the period of November 2010 to May 2012 to the value of £26,236. During this period, Cardiff Restaurant Company paid just £894 of the VAT owing. The company also failed to make any payments towards £14,020 of PAYE and National Insurance liabilities.
Trading with knowledge of insolvency
There were further liabilities created as a result of the company’s failure to cease trading despite knowledge of the insolvency. On 19 October, Cardiff Restaurant Company had no known assets and net liabilities of at least £53,018.
A trade creditor was also in the process of obtaining a County Court Judgement (CCJ) against Cardiff Restaurant Company with a hearing scheduled for 4 November 2011. However, despite the failure to make payments to trade creditors and HMRC, payments to the value of £21,382 were made from the company to Mr Kealy’s personal bank account and the bank accounts of a number of personal creditors. He also paid £4,500 to personal creditors following direct professional advice to act in good faith. This sum was paid the day before he visited an Insolvency Practitioner on 23 March 2012.
The Cardiff Restaurant Company Limited went into liquidation on 11 April 2012, and, as a result of the hearing, Mr Kealy was served with a six-year disqualification and ordered to pay costs of £4,935.
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