In the last week, a car repair garage and a dodgy commercial vehicle dealer have been handed combined director disqualifications of 17 years for failing to meet their duties and responsibilities as company directors.

In the first case of motoring madness, John Henry Hierons, the sole director of a commercial vehicle supplier in Surrey, has been handed a nine year directorship ban after failing to account for over £1.3million of cash withdrawals.

The director failed to maintain proper accounting records for his company. He also ignored his statutory duty as a company director to keep sufficient records to explain payments, transactions, and in this case, substantial withdrawals.

The Insolvency Service’s findings

The Insolvency Service investigation found that Hierons’ company, Lenco Commercial Services Ltd, traded between November 2010 and September 2012, before entering into liquidation. Between the period of February 2011 and September 2012, £1.3million disappeared from the company’s accounts without any supporting documentation.

When the company entered liquidation in 2013, there was a recorded deficiency of £26,000, of which £23,500 was owed to trade creditors. So, despite the substantial withdrawals from the company’s bank accounts, Mr Hierons failed to pay his creditors the relatively small sums of money he owed.

A case worthy of nine year ban

Commenting on the court’s decision to hand Mr Hierons a nine year director disqualification and a £7,000 bill for costs, a spokesperson for the Insolvency Service said: “This is a very serious case and one fully warranting a nine year disqualification.

This disqualification sends a clear and robust warning message to other company directors that if you do not take your responsibilities seriously, like in this case, we will act to disqualify you.”

Eight year ban for car mechanic

Eric Reid, the director of a Glasgow-based car repair garage, has been handed an eight year director disqualification failing to maintain or preserve full accounting records, or deliver them up when he was asked to do so. The result was over £240,000 of unpaid creditor liabilities which could not be accounted for

This meant that the Insolvency Service’s investigation team, which began its investigation after a winding up order had been granted to liquidate the company, could not identify the true nature of the business, establish when the company ceased trading, or calculate the true value of the company’s assets. More specifically, this included:

  • The reason for payments of £70,684.80 into the company’s bank accounts from the period of 7 January until the company’s liquidation;
  • The reason for payments from the company’s bank accounts totalling £119,554.66 during the same period;
  • The true value of VAT payments due to HMRC;
  • The names and identities of any of the company’s employees, and the full amount due to HMRC in relation to PAYE/NI contributions;
  • The amount received by Mr Reid by way of a salary or any other benefits.

As a result of these multiple misdemeanours, the liquidator could not recover the £240,000 required to make the necessary payments to creditors.

A warning to directors

Welcoming the court’s decision to disqualify Mr Reid, a chief investigator at the Insolvency Service said: “Directors who do not maintain adequate accounting records or do not deliver them up to a liquidator can expect to be investigated by the Insolvency Service and enforcement action be taken to remove them from the market place.

“Mr Reid’s failure to keep accounting records has hindered the liquidator’s investigations and as a result funds have not been recovered to repay creditors. Taking action against Mr Reid is a warning to directors to take heed of their duties and obligations.”

If you need advice on trading whilst insolvent, or you are unsure what wrongful trading is; or you are unsure what action to take over significant VAT errors call free 08000 746 757 to speak to someone who can help.

Written by: Mike Smith