Why the client needed our help
We were instructed by two directors (who formerly traded together in the same company) to apply for court permission to act as directors despite their agreement to enter into voluntary disqualification undertakings pursuant to Section 1A Company Director’s Disqualification Act 1986 (“CDDA”).
The background was that a trial was listed in the director disqualification proceedings. However, part of the tactics of the director disqualification claim was to legitimately slow down the proceedings to enable our clients to get “back on their feet” and then later consider whether they wanted to make an application for leave to be directors of new companies they had set up.
Ultimately, they decided to go down this route instead of fighting the disqualification proceedings at trial. This was partly based on the economics of running a case at trial, but also as a result of evidential issues in the claim. The Defendants decided to deal with the director disqualification proceedings by way of separate voluntary disqualification undertakings.
The directors had been subject to director disqualification proceedings, on the basis that they had traded to the detriment of Her Majesty’s Customs and Revenue (“HMRC”) by not filing returns and paying HMRC proportionately less than was being paid to all other more pressing creditors, particularly in respect of VAT and PAYE/NIC.
How we helped
We drafted an affidavit for each of our clients and managed to secure time on what would have been the first day of the director disqualification trial to hear both applications for permission to remain as directors.
The affidavits were comprehensive and drafted to demonstrate that
- the new companies were up-to-date with their tax liabilities,
- all returns were filed in time,
- each company was trading solvently, and
- that safeguards were in place to ensure that each company continued to operate in an acceptable manner which did not threaten the public interest.
Following the service of this evidence, the Secretary of State (who is required to respond to such applications and direct the Court to any concerns) raised numerous queries with us and, with our clients’ assistance, we were able to deal with some very complicated accounting queries over a short period of time (we have in-house accountancy expertise that assists us in this regard).
By the Sunday night, the day before the hearing, the Secretary of State confirmed that no objection would be made to the order sought at the hearing. However, concerns were set out as to the range of restrictions to which each of the directors would be subject to at the hearing.
At the hearing we arranged for a barrister to attend on behalf of the directors and they made representations as to the applications and the restrictions required by the Secretary of State. Some of these were particularly onerous, including applying to the Court whenever a neutral director resigned, ensuring that a qualified accountant was present at all internal meetings, ensuring that applications to Court were made to replace such accountants. These restrictions would not have been commercially viable and would have stymied the directors’ respective businesses.
At the hearing our barrister was able to persuade the Court that the restrictions were unacceptable and we were able to reach solutions which satisfied both the Secretary of State and the directors.
This helped safeguard their current businesses which otherwise would likely have both collapsed and failed without their continued involvement.
“I was delighted by the work done by the team at FWJ. Not only did they help me secure the time I needed to make my new business a success, they then obtained permission from the court for me to remain a director of my new business moving forward. Without that permission, my new company would have been in grave danger. As it is, I can continue to grow it free from the worry of my original disqualification. I cannot recommend them highly enough. Their legal and tactical knowledge was spot on.” – GT
“Based on my personal experience, I would strongly recommend using FWJ for director disqualification matters. Not only did the team handle the original claim against me and deal with that by way of an undertaking, they also successfully got me leave to remain a director of my existing business for the remaining period of my disqualification. Tactically and commercially Andy Wilks and the team played it just right and I am now able to get on with my business life without the worry of disqualification hanging over me. A great result.” – TP