Winding up Petition leads to Golfing Investment Directors 19 Year Bans

Two directors of the Lancashire-based Worldwide Sports Investment Limited have strayed off the fairway and find themselves buried in the rough after receiving a combined 19-year director disqualification. The disqualification followed a successful winding up petition by the insolvency service.

Christopher Smullen (44) and Sean Keating (54), have been banned from acting as the directors of a limited company for their part in the sale of investments in a golf course and hotel development in Portugal.

The disqualifications were handed down by the High Court following an investigation by the Official Receiver’s Public Interest Unit, part of the Insolvency Service. The company, Worldwide Sports Investment Limited, was wound up following the presentation of a winding-up petition on 4 February 2013, owing creditors at least £278,201.

The Insolvency Service investigation

The investigation found that the two directors were responsible for a litany of failings. For his part in the running of the fraudulent company, Christopher Smullen was barred from promoting, managing or being a director of a limited company for 13 years, commencing on the 16 June.

The allegations put to the court and subsequently proved in respect to Mr Smullen’s conduct, included:

  • Individuals were hoodwinked into making payments to Worldwide Sporting Investments Ltd (WSI) in respect to a hotel and golf course. However, these funds were misused with no benefit for the investor.
  • The company used promotional literature which stated that the project was endorsed by a prominent professional golfer. These claims were not true and the company did not have permission from the golfer or his agent to use his name or image.
  • WSI’s marketing literature also stated that the investments were totally secure and would generate returns of 200 percent. The company also told potential investors that the investment opportunity was almost fully subscribed, when in reality only 11 of the 100 shares had been applied for.
  • Despite receiving payments from 11 individuals worth a total of £275,000, including administration fees of £2,145, there is no evidence that any of the investors received any benefit from their investment, nor was there any evidence to suggest any investment had been made on their behalf by the company.
  • Analysis of Mr Smullen’s bank statements showed that the investment monies received were used to fund his own personal expenses. £194,914 was used for gambling, resulting in a net loss of £11,629 to WSI.

Mr Smullen also racked up a number of accounting failures, which meant it was not possible for the investigators to:

  • Ascertain the full details of the individuals who invested money in WSI, or determine whether any of the payments were due to HMRC for PAYE/NIC.
  • Determine the purpose of £51,777 of cash withdrawals from the company’s account between 20 May 2011 and 23 April 2012, or sums totalling at least £43,900 paid from the company’s bank account for items that do not relate to legitimate business expenses.
  • Determine whether £11,434 paid to airlines and hotels via debit card was for legitimate company expenses.

For his part in the scam, fellow director Sean Keating (54), gave an undertaking to the Secretary of State for Business, Innovation and Skills not to promote, manage or be a director of a limited company for 6 years, commencing from 17 September 2014.

In the High Court hearing, Mr Keating did not dispute that between 23 July 2010 and 02 August 2011, he was:

  • Responsible for the dissipation of investment funds totalling at least £94,091, and failing to oversee the use of the company account to ensure funds removed were used for legitimate business purposes and did not come from monies that were supposedly held in trust.
  • Responsible for signing at least 7 blank cheques that were passed to fellow director (Mr Smullen) without determining the purpose of the cheques.

Dishonest and reckless directors

In total, 11 individuals each made investments totalling £25,000, plus administration expenses of £195. However, at the time of company liquidation, there was not a penny for the benefit of the company’s creditors. There were also no books or records provided by the directors on the date of the winding-up order.

Welcoming the disqualifications, Ken Beasley, the Official Receiver, said: “The two directors caused significant loss to members of the public by inducing them to invest in a scheme which was not legitimate. It used images without consent; made claims as to assets held and the security of the investments which were not founded; and used the funds raised not for investments, but for their own personal expenditure.

“The Insolvency Service has strong enforcement powers and we will not hesitate to use them to remove dishonest or reckless directors from the business environment as shown in this case.”

In this case the directors behaved badly and got what they deserved but the majority of directors face winding up petitions used as a means of debt collection. If your company is faced with a winding up petition or you are trading whilst insolvent then as a director you must realise the need to act urgently. Call 08000 746 757 for an urgent and informed response.

Written by: Mike Smith

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