Director disqualifications and running the risk of being made personally liable for company debts is one thing, but there are some acts of misconduct in the formation, promotion or management of a limited company that warrant criminal, rather than civil convictions.

In this case, we take a look two company directors: an optician who tried to hide assets from his creditors; and a construction company boss who fraudulently removed £54k from a business he operated as an undischarged bankrupt.

Optician tries to pull the wool over creditors’ eyes

Ronald James Preedy, a former bankrupt, has been handed a 9-month custodial sentence at the Old Bailey for fraudulently transferring a property to his children in an attempt to hide assets from his creditors. The conviction follows a full criminal investigation and prosecution by the Department for Business, Innovation and Skills.

The court heard that the erroneous eye doctor made false representations that a Dr Yaqub had signed claim forms for the payment of eye tests which had not been carried out. In so doing, he defrauded NHS Primary Care Trusts of £136,008 in overpayments.

Despite acknowledging the deficit and completing an ‘acknowledgement of service’ to show he was fully aware of the substantial debt he had created, the very next day Mr Preedy transferred the ownership of the family home to his three children for no monetary value.

Putting property beyond his creditors’ reach

Commending on the court’s decision to imprison the eye doctor, the investigating officer at the Department of Business, Innovation & Skills, said: “Mr Preedy’s main asset would have been more than sufficient to repay all his debts in full, and yet, he decided to take a different course of action by cynically putting the property beyond the reach of his creditors while continuing to reside there.”

Jail time and director ban for construction boss

Philip Henry Martin, an undischarged bankrupt and director of a construction company, has been sentenced to 20 months’ imprisonment and disqualified from acting as the director of a limited company for 7 and a half years.

The convictions were handed down after Mr Martin pleaded guilty to acting in the management and formation of two companies whilst being an undischarged bankrupt and to fraudulently removing £54,000 from one of the companies.

The Insolvency Service investigation

A full investigation by the Insolvency Service found that Mr Martin (42) had been made bankrupt in December 2010, with estimated liabilities of £2.1million. This undischarged bankruptcy precluded Mr Martin from acting in the management or formation of a company.

However, the investigation showed the bankrupt director set up two companies, Multiguard Solutions UK Ltd and Premiere Building and Construction Ltd, between November 2011 and May 2012. A winding up order was subsequently made in respect to Multiguard Solutions UK in May 2012.

The investigation also revealed that during this time an estimated £108,000 was removed from company bank accounts and placed into another account under Mr Martin’s control. £55,000 of this money was used to fund the deceitful director’s personal life.

During the case, the Judge listed a number of other aggravating features, including Mr Martin’s attempts to hide his identity from the creditors by listing a Mr Cross as the company director. In reality, Mr Martin had paid Mr Cross to live in Thailand, well out of the reach of the official receiver. Mr Martin also pretended to be Mr Cross and encouraged others to lie to the official receiver.

“He ripped off a lot of people”

Commenting on the case, the deputy chief investigation officer from the Department for Business, Innovation and Skills, said: “This man was a bankrupt, meaning he should not have been controlling a company. He ripped off a lot of people and destroyed the company. The courts will clearly consider imprisonment for these very serious offences as he has discovered.”

Both directors were subject to a successful winding up the action by the BIS and insolvency service and this kind of criminal behaviour hurts customers and the reputation of hard working directors. There are many directors who unlike the two mentioned here have a legitimate need for insolvency help.

If your company is in need of insolvency help and you need someone you can trust call 0800 074 6757 to speak to a team member or ask for live support help on the bottom right-hand side.