A father and son team of would-be property tycoons have been banned from acting as directors for a combined 10-and-a-half years for failing to comply with their statutory obligations, and for making payments to the benefit of their family during a company insolvency. Wrongful Insolvent trading in this case was when the insolvent company director decided to make a preferential payment to family members.
Thomas Coakley and Ronald Coakley, the directors of the St. Vincent Street Ltd property company, have received a 7 and a 3-and-a-half year ban respectively for their part in the mismanagement of their business.
Thomas Coakley (54) signed a disqualification undertaking on 12 February 2015 for 7 years, which means he will not be able to take part in the promotion, formation or management of a company or limited liability partnership until February 2022. The man’s son, Ronald Andrew Coakley (28), signed a disqualification undertaking on 14 January 2015, banning him from acting as a director of a limited company until July 2018.
The Insolvency Service’s findings
Thomas and Ronald Coakley were the directors of St. Vincent Street Ltd, which traded between April 2010 and February 2013 in the acquisition and letting of residential and commercial property. On 14 February 2013, the company entered into administration with assets in excess of £9 million and liabilities of more than £21 million, leaving an estimated creditor deficiency of £12,615,491.
Like all property companies, St. Vincent Street was required by law to protect tenants’ deposits by placing them in the government backed tenancy deposit scheme. However, the company failed to protect tenancy deposits of £19,425.
The Insolvency Service investigation also found that the company did not properly account for its tax obligations throughout its period of trading. All staff members were paid their wage as a gross figure, despite employment contracts which claimed otherwise. This meant that although the company was responsible for paying employee tax under the PATE system, only one employee was actually registered on the scheme.
In total, the company’s accounts showed that employees had been paid over £500,000 during the company’s trading period, but in that time declarations, deductions and payments to HMRC for PAYE and National Insurance contributions totalled less than £10,000.
Payments made to a family member
This was just the start of the dodgy dealings of Messrs Coakley. Despite operating director loan accounts, the pair did not account to HMRC for any corporation tax. However, the worst was yet to come.
During a company insolvency, the directors have a duty to put the interests of creditors ahead of all other parties. If they continue to trade beyond the point when insolvent liquidation becomes unavoidable, they risk serious personal and professional consequences.
In this case, just before St. Vincent Street ceased trading, payments of £26,245 were made to a family member, clearing out the company’s bank account of all funds. This was to the detriment of the company’s creditors.
Mr Coakley put his own interests first
Welcoming the disqualifications, Cheryl Lambert, the Insolvency Service’s head of outsourced investigations, said: “The Insolvency Service will take action to protect the integrity of the market place where directors do not comply with their obligations to pay tax and to safeguard tenant deposits.
“In this case, Thomas Coakley ran the business as a personal fiefdom and consistently put his own interests before that of tenants, creditors and the general taxpayer.”
Many directors of insolvent companies fall into the trap of taking money from the company, often in their eyes legitimately but the insolvency service may take a different view. If you are unsure as to what to do with an insolvent company and considering a creditors voluntary liquidation call us now on 08000 746 757.