We’ve all heard that old adage about the risks of mixing business with pleasure, well, that’s something the following two couples might like to consider before they embark on their next business venture.

The first couple to learn that matrimonial bliss is no guarantee of commercial success were John and Carmel Billany, the two directors of the Newton Aycliffe-based Linden Group Limited. The love drunk executives have been disqualified from acting as company directors for a combined total of 12 years six months for recording false sales income of more than £1bn.

False sales of more than £997million!

John and Carmel Billany were the joint directors of the Linden Group, a hydraulic components company, until September 2013, at which point the company became insolvent due to a debt owing to a finance company.

The company’s records show that for the year ending 31 December 2012, there was a turnover of more than £1bn, with monthly turnover for the five months between January and May 2013 of more than £100million. However, in reality, Linden was turning over in the region of £3 million per year, some £997million short of the reported sales.

Both John and Carmel Linden provided disqualification undertakings to the Secretary of State for Business, Innovation and Skills. John Billany did not dispute that he caused Linden Group to raise false sales invoices, while Carmel Billany did not dispute her neglect, as a company director, for allowing this extravagant fraud to take place.

Two more directors removed from the business community

Welcoming the director disqualifications, Mark Bruce, a chief investigator with the Insolvency Service, said: “These disqualifications should demonstrate to company directors that the Insolvency Service will investigate all forms of misconduct, no matter how complicated the evidence might be.

“We will always look to remove from the business community those directors who act below the standards that should be expected of them.”

A second couple help themselves to funds

A second married couple, Mark and Janet Styler, have been disqualified for a combined period of six years for withdrawing funds from Window & Conservatory Options Limited after they had been told the company was insolvent.

The company, which began trading in March 2009, sold and installed double-glazing and conservatories to domestic customers in the Tameside, Peak District and Derbyshire areas.

The Insolvency Service’s findings

An Insolvency Service investigation into the running of the company found that in June 2011, the Styler’s company accounts showed the company was insolvent. At this time, the couple’s accountants warned them that the company could not afford to continue to make the same level of payments to them. The accountants also warned about the risks of continuing to trade, yet the couple continued regardless.

Draft accounts prepared for the period ending 30 September 2011, revealed not only that the company was still insolvent, but that the directors had also shown preference to themselves by withdrawing a further £133,448 for that year. This is despite the fact that they already owed the company £95,862 for previous drawings that had exceeded the company’s profits.

A few days after receiving these accounts, the couple instructed a new team of accountants to amend them based on information they provided. The new accounts showed the company was still insolvent, but the amount owed by the couple to the company had been removed.

For the period 11 February 2012 to 17 September 2013, the directors withdrew further payments from the company’s accounts totalling £172,715.50. As a result of these drawings, the company could no longer afford to pay its creditors and was subsequently placed into liquidation.

An abuse of limited liability

Commenting on the director disqualifications, Cheryl Lambert, a chief investigator at the Insolvency Service, said: “Directors who abuse limited liability and use company funds to meet their personal expenses can expect to be investigated by the Insolvency Service and enforcement action to be taken.

“In this case, Mr and Mrs Styler repeatedly ignored warnings from professional advisors and used company funds as their own. The action we have taken is a warning to directors of their responsibilities and requirements to act for the good of the company and its creditors.

Having taken professional insolvency advice to continue on ignoring the same advice is a recipe for disaster as is shown in this case. The directors selfishly paid themselves whilst creditors waited to be paid, which is both unfair and against insolvency law. The director disqualification is likely to be the first step only and it is very likely the directors will have to repay all the money that was taken. If you are trading whilst insolvent it is critical to seek professional insolvency advice and adhere to it – you can call 0800 074 6757 now to speak to someone who can help.

Written by: Mike Smith