Kathryn Joy Clark (52) and Richard Aston Clay (50), have received a combined 29 year director disqualification for their part in the management of three Nottingham based financial services firms.

The disqualifications, which forbid the pair from acting as a company director or taking part in the promotion, formation or management of a company, were handed down after an Insolvency Service investigation revealed the mishandling of over £7million of investment funds.

Ms Clark and Mr Clay were officers of Arck LLP, HD Administrators LLP and Joyston Alternative Assets Ltd. As a partner of HD Administrations and director of Joyston Alternative Assets, Kathyrn Clark did not dispute the allegations of misconduct and received a 14 year disqualification, commencing on 6 May 2014.

Richard Aston Clay, as partner of Arck and director of Joyston Alternative Assets, chose not to respond to the allegations made against him, and was handed the maximum 15 year disqualification by the High Court. The disqualification began on 29 December 2014.

A litany of crooked dealings

HD Administrators operated a self invested pension plan (SIPP), which was authorised and regulated by the Financial Conduct Authority (FCA). The firm also collected and held funds on behalf of connected companies which were earmarked for future investment. HD Administrators purported to be regulated in this area, but it was not.

One of the connected companies earmarked for future investment was Joyston Alternative Assets, into which nearly £9million was invested and held by HD Administrators in a nominated bank account. Against the terms under which the money was being held, HD Administrators then transferred in excess of £7.2million out of the account. Almost all of that money is irrecoverable.

Arck LLP presented itself as a property investment company, and received money from members of the public who were looking to benefit from a number of property developments. In reality, Arck dissipated this money without a single penny being spent on any development work.

To justify the company to its investors, bank statements were falsified on two separate occasions to show there was more than £12million in the company’s bank account. However, the company’s account held the smaller amount of just £25. The vast amount of this money is also irrecoverable.

As a result of these dealings, HD Administration was wound up, following a successful winding up petition, by the court on 14 June 2012; Joyston Alternative Assets was placed into administration on 3 May 2012; and Arck was wound up by the court on 11 April 2012, with creditor claims made in its liquidation valued at over £63million.

The findings of the Insolvency Service investigation

The Insolvency Service’s investigation into Joyston Alternative Assets found that:

– Ms Clark and Mr Clay had caused or allowed potential investors to be misled by HD Administration’s claims that the company was authorised to hold investors’ funds.

– The pair allowed Joyston to make payments to connected companies for which no security or benefit was received. These payments amounted to £6.6million.

– Mr Clay allowed Joyston to make purchases of US Life Assurances Policies amounting to £502,555, with premium payments of £33,325. No such dissipation of funds was permitted according to the terms of the investment.

The investigation into Arck LLP revealed that:

– In July 2011, Ms Clark and Mr Clay made false representations by forwarding a false bank statement to a financial advisor that showed the company had a bank balance of £12.2million. The true balance was just £25.

– In November 2011, the pair forwarded a falsified bank statement to a financial advisor which showed Arck had a bank balance of £13.75million. Again, the real balance was £25.

The investigation into HD Administration found that:

– Ms Clark caused funds to be removed from bank accounts controlled by HD Administration on behalf of connected companies. This was in direct contravention of the terms under which £7.2million was handed over by investors.

The directors’ conduct fell well below expectations

Commenting on the disqualification, official receiver Ken Beasley, said: “Mr Clay and Ms Clark caused significant loss to members of the public by using investment money without the knowledge or consent of those investors. In doing so, their conduct fell far below expectations given the level of trust placed in them as financial professionals.

“By obtaining lengthy disqualifications, the Insolvency Service has shown that such conduct by directors will not be tolerated. Tough action will be taken to put a stop to companies trading against the public interest and we will seek to remove culpable directors from the business environment.”

Misrepresenting company documents is an offence in itself and the proper upkeep of company records and accounts is business critical as well as being a legal requirement. If you as a director are considering a company administration it is vital to ensure company affairs are in good order. If you are unsure what the impact of having poor record keeping when entering into company administration or company liquidation call 08000 746 757 to obtain some clarity.

Written by: Mike Smith