The two owners of a discount store have been disqualified from operating as directors for a total of 20 years after failing to maintain adequate accounting records.
Javed-Yacub Fozdar (38) and Riyaz Dawood Fozdar (37), from Manchester and Salford respectively, were the directors of the Pound Empire Ltd, a retail business with outlets in Liverpool, Manchester, Warrington and Stockport.
The disqualifications came into force on 15 November 2014, following an investigation by the Insolvency Service and a ruling by District Judge Dignan at the County Court in Stockport.
Assets were not made available to creditors
The failure of the directors to keep or deliver adequate accounting records made it impossible for the Insolvency Service to establish an accurate level of company income or expenditure. Neither was it possible to ascertain the payee or the purpose of £900,000 in cheques. There was also no record of the money the directors had personally withdrawn from the business.
Furthermore, the Insolvency Service investigation found the directors had entered into a transaction on 25 January 2012, on the very day the company ceased trading.
This transaction centred on the transferral of assets, mainly stock, much of which was subject to a retention of title, which meant the stock was not the directors’ to sell. Nevertheless, the stock was transferred to a company owned by Javed Fozdar’s wife as payment for a debt owing to the connected company.
The transfer made it impossible for the holders of the retention of title to recover their goods, while also rendering the insolvent company’s assets unavailable to its creditors.
A clear breach of the directors’ duties
Welcoming the disqualifications, Robert Clarke, the Insolvency Service’s Head of Insolvent Investigations North, said: “Directors have a duty to ensure their companies maintain proper accounting records, and following insolvency, deliver them to the office-holder in the interests of fairness and transparency.
“Without a full account of transactions it is impossible to determine whether a director has discharged his duties properly, or is using a lack of documentation as a cloak for impropriety.
“The transfer of all the assets of the company to a connected party is a clear breach of the duties directors owe their creditors.
“Javed-Yacub-Fozdar and Riyaz Dawood Fozdar have paid the price for failing to fulfil their obligations as directors and they cannot now carry on in business other than at their own risk”.
[h2]Wound up following a Creditors’ Voluntary Liquidation[/h2]
Pound Empire Ltd entered into a creditors’ voluntary liquidation on 29 February 2012 with assets of £20,200 and liabilities of £611,187.
A creditors’ voluntary liquidation is the most common method of closing an insolvent company in the UK. The process is designed to allow insolvent companies to close voluntarily, while giving the company directors time to get the company’s affairs in order before it is wound up.
In this case, a creditors’ voluntary liquidation would have been an appropriate and lawful method of winding up the business. However, as Messrs Fozdar had failed to keep and deliver proper accounting records and failed to act in the best interests of their creditors, an investigation was launched.
For more information about how a creditors’ voluntary liquidation can liquidate an insolvent company, and liquidate the company’s debts, please contact our team of advisors on 08000 746 757.
Written by: Mike Smith