The director of a vocational training company has learnt a hard lesson after receiving an eight-year directorship disqualification for taking the money for training courses, without providing the training.
Vinay Kanani (54), of Wembley, Middlesex, received his ban for recklessly entering into a scheme that made his company, Trade Qualified Limited, insolvent, and for allowing the scheme to trade to the detriment of creditors. Specifically, the company’s creditors were students who had paid for training courses that Mr Kanani knew his company could never provide.
Trade Qualified Limited was formed in 2006 and traded as a recruiter for a number of vocational training providers. The company operated by collecting up-front fees from students; it held on to the payments until the training programmes were completed, at which point the money was released to the training provider. The company was placed into a creditors’ voluntary liquidation on 4 February 2013 when an Insolvency Service investigation into the running of the company commenced.
The investigation’s findings
Following a successful winding up of the company the Insolvency Service investigation revealed a litany of failures carried out by Mr Kanani. On the same day he was appointed the sole director of Trade Qualified Limited, on 5 October 2012, he transferred £538,919 from the company’s bank accounts to another limited company of which he was the sole director. He then used these cash reserves to buy Trade Qualified shares from its previous owners.
Just a week after the ‘buy out’, the company’s main training provider went into liquidation, and no replacement was ever found. However, this did not prevent Mr Kanani from continuing to take funds from new and existing students all the way up to the date Trade Qualified entered into liquidation.
During this time, the investigation shows that Mr Kanani exercised absolutely no control over the affairs of the company. The company continued trading and received a further £198,878 from members of the public for training programmes it could not and did not provide.
It was also found that £140,720 was paid to entities that were controlled by an associate. Mr Kanani allowed this associate to control the finances of Trade Qualified without any oversight or control over the way the business was run.
£32,000 was used by the company to pay for motor vehicles, without there being any reason for the company to purchase vehicles in the normal course of its work. The company had not bought any vehicles until Mr Kanani took the helm.
There was also the small matter of £39,317, which had been expressly intended to be retained under the sale agreement to repay existing Corporation Tax. However, the money was not used for this purpose.
Mr Kanani ‘did nothing and knew nothing’
The result of this mismanagement was that just four months after purchasing the company, on 4 February 2013, Trade Qualified entered into liquidation. On 5 October 2012, when Mr Kanani became the company director, Trade Qualified had £679,304 in the bank. On entering liquidation, the company had reserves of just £17,309, with a creditor deficiency of at least £521,971.
Welcoming the decision to hand down a lengthy banning order, Cheryl Lambert, a chief investigator at the Insolvency Service, said: “Directors who cause the public to lose money can expect to be investigated by the Insolvency Service and enforcement action taken to remove them from the market place.
“In this case, Mr Kanani did nothing and knew nothing, resulting in company funds being removed and members of the public being lured into paying for courses that could never be provided. Taking action against Mr Kanani is a warning to directors of their responsibilities and a reminder that they cannot allow themselves to be ignorant of the actions or others.”
Trading irresponsibly or wrongful trading as it is most commonly know can have a disastrous impact on directors irrespective of how ignorant they are. The law does not take ignorance as any defence when running a limited company directors have a duty to understand their business from end to end.If you think you are trading wrongfully or simply not sure then call 08000 746 757 to obtain free discreet advice.