Directors Disqualification - Case Study
Obtaining section 17 leave to continue acting as a director
Our client was a director of a £100 million turnover group of companies involved in property development work. He had also become a director of a separate recruitment company (on the recommendation of a friend). Unfortunately that company (which he had no day to day dealings with) entered into liquidation with debts due and owing to the Crown. This resulted in legal proceedings being issued by the DTI against him.
What we did:
We firstly compiled detailed affidavit evidence in the main proceedings, setting out our client’s position in full and setting out the many mitigating aspects in the case. The Insolvency Service were not willing to discontinue the proceedings and as such, we negotiated an undertaking on behalf of our client not to act as a director for a period of 3 ½ years (being the lower bracket).
It was, however, essential to our client that he remained a director of all of the companies within the property development group. There were 17 companies in total. Each company he was a director of was a Special Purpose Vehicle, each of which had been incorporated to develop an individual property site. It was a requirement of the banks that there be a Special Purpose Vehicle for each site to secure and ring fence the bank lending facility on each project. The banks also required our client to remain a director of each company in order that the projects continued.
We therefore compiled very detailed affidavit evidence in support of an application to the court for leave to be given for him to remain a director of all 17 companies. This entailed setting out in detail the background to each company, the bank finance arrangements, the individual construction projects, and other information to show effectively both how well run each of the companies was and why it was vital that our client remained a director of each company.
The Result:
The matter was originally to be heard before a Registrar at the High Court, but due to the public policy issues of seeking leave for so many companies in one application, the matter was referred to a Senior High Court Judge. At the hearing, the Judge agreed that leave should be given in respect of each and every one of the 17 companies and the result remains the highest number of companies ever granted leave in one application.
The case remains a leading authority in relation to Section 17 leave, details of it can be found as follows: “Smith v Secretary of State for Trade & Industry [2003] ALL ER (D) 72”.
The result enabled our client to continue the growth of his property development companies. During the course of this 3 ½ year period of disqualification, a further 5 applications for Section 17 leave were applied for and successfully granted, making a total of companies successfully subject to leave applications 22.