Director disqualifications is no joke and can have very serious personal consequences. If you are limited company director and your company is trading insolvently you must seek professional help immediately. Disqualifications often follow compulsory liquidation or in some cases creditor voluntary liquidation especially when HMRC are a major creditor. Four company directors have been handed lengthy disqualifications in May for their part in a diverse array of offences. The Insolvency Service is tightening its regime and catching more and more company directors out.
Remember, ignorance is not a defence, so if you are genuinely unsure of the legality of different aspects of running your company, make sure you seek advice.
Haulier driven to disqualification
A haulier from Kent has been disqualified from operating as a company director for eight-and-a-half years for failing to properly deal with the taxation affairs of his company.
An investigation by the Insolvency Service found that at least £509,370 of VAT was neither reported nor paid to HMRC. There were also over £1million worth of transactions which had insufficient explanations or supporting documentation. To make matters worse, the haulier submitted a VAT reclaim of £64,948 in December 2011. However, when HMRC inspected the company’s records, they found the company actually owed £215,881 in relation to VAT.
Commenting on the case, the chief investigator at the Insolvency Service, said: “The director’s conduct of the company’s affairs fell extremely short of the standards of competence and integrity expected, and to protect the integrity of the economic system the Insolvency Service will use its power to protect the business world and the general taxpayer when directors act this way.
Second hand dealer disqualified for selling old bangers
Selling old bangers in itself is fine, but Mr Khadam, the director of a second hand car business, consistently misled his customers by providing incorrect and insufficient information about vehicles prior to purchase.
The Insolvency Service investigation found the business was being run in a manner that was to the detriment of its customers. It also found the deceitful director persistently breached consumer protection legislation, despite receiving advice from Trading Standards.
Mr Khadam also failed to deal with complaints received from customers in accordance with the law. As a result, of the £198,780 of current liabilities at liquidation, £81,485 related to losses incurred by customers. In return for his conduct, Mr Khadam was handed a seven year disqualification, preventing him from becoming involved in the promotion, formation or management of a company during that time.
The curtain falls on a marquee company
The director of a marquee company in Kent has been disqualified for five years for transferring the company’s money to himself and other connected parties. An Insolvency Service investigation found Mr Pemble transferred at least £144,427 for no apparent benefit to the business and at a time when the company was insolvent.
During his directorship of the company, Mr Pemble was also trading with at least three other businesses which operated in the entertainment industry on a sole trader basis. Much of the transferred money was used to fund these other entities. The investigation also found that Mr Pemble had previously been the director of three other marquee hire companies, all of which had entered liquidation.
Commenting on the case, the Official Receiver Chatham at the Insolvency Service, said: “A director owes a fiduciary duty to a company to act in its best interests, rather than for their own personal benefit. Mr Pemble chose to use company funds for his own personal benefit and that of his other business entities at a time when the business was insolvent. He demonstrated a disregard to the company’s creditors who have suffered as a result.”
All that glitters is clearly not gold
The joint directors of a Middlesex jewellery company have been handed two seven-and-a-half year disqualifications for knowingly allowing their company to evade VAT. The disqualifications follow an undertaking given by the pair to the Secretary of State for Business, Innovation & Skills.
An investigation by the Insolvency Service’s Public Interest unit found the company traded as a jewellery and fabric wholesaler, and participated in transactions connected to the fraudulent evasion of VAT.
There was inadequate due diligence into suppliers, despite the company being made aware of the high risk of Vat fraud in their sector. There were also wrongful VAT claims totalling £321,107.