Director Disqualification for trading whilst insolvent

Case 1 – Director Disqualification for trading whilst insolvent and failing to maintain company records.

Director Disqualified for 5 years by a signed undertaking of the director.

Between 1 April 2017 and 18 December 2017, the disqualified director caused or allowed The Insolvent Company to make payments of £60,844 to myself and £93,611.25 to a shareholder at a time when I knew or ought to have known that The Insolvent Company was insolvent, in that:

• In March 2017 the company’s accountant warned me that the company was insolvent.
• In a SAGE report for period July 2015 to June 2016, The Insolvent Company was shown to be balance sheet insolvent with a deficiency of £524,577.93.
• Between 1 April 2017 and 18 December 2017, at least 48 payments totalling £93,611.25 were made from The Insolvent Company’s bank account to a company shareholder
• Between 6 April 2017 and 31 October 2017, at least 21 payments were made from The Insolvent Company’s bank account to me totalling £60,844.
• No documentary evidence has been received to verify the purpose of these payments, or what they represent.
• From 1 April 2017 payments from the bank account total £564,751.43, to HMRC £34,737.90, other payments £375,558.28, as against £154,455.25 to me and the shareholder.
• Since the company’s management accounts of July 2015 to June 2016 the company’s deficiency increased from £524,577.93 to £738,034.74 in the latest liquidators statement of receipts and payments (corrected to £812,955.80 following receipt of HMRC’s claim).

In addition, I failed to ensure that between 01 June 2016 and 02 February 2018 (the date of liquidation) The Insolvent Company preserved and delivered up to the Liquidator such records as were maintained. As a consequence of this failure it has not been possible to:

• Deduce, in the absence of original sales invoices, the source of income totalling £1,376,249.29 into The Insolvent Company’s known bank account during the period 1 June 2016 to 31 January 2018. Determine, in the absence of any purchase invoices, the reason for expenditure totalling of £1,390,106.82 out of The Insolvent Company’s bank account during the period 1 June Page 3 of 3 2016 to 31 January 2018. From the limited information available the expenditure of £1,390,106 includes the following items: The purpose and manner of payments to me totalling at least £91,744 between period 1 June 2016 to 31 January 2018 and whether renumeration taken during the period the company was insolvent was reasonable. The purpose and manner of payments to the company shareholder totalling at least £183,611.25 between period 1 June 2016 to 31 January 2018 and whether renumeration taken during the period the company was insolvent was reasonable. Whether payments to a connected company totalling £118,733.48 represent genuine company expenditure. Whether payments to American Express totalling £40,320 represent genuine company expenditure. Whether payments to hotels totalling £28,528.26 represent genuine company expenditure. Whether payments regarding car usage totalling £11,445.82 represent genuine company expenditure. Whether payments to restaurants totalling £8,616.27 represent genuine company expenditure. Whether payments regarding various miscellaneous purchases, examples including casino, gym, cinema and Ticketmaster totalling £33,640.86 represent genuine company expenditure.
• Establish the amounts properly due to HMRC in respect of PAYE, VAT and NIC in respect of the tax years 2016/2017 and 2017/2018. Determine the true extent and reason for The Insolvent Company’s liabilities in respect of trade and expense creditors showing as £579,820.32 on the Statement of Affairs.
• Verify the reasons for The Insolvent Company’s failure and to account for the deficiency.
• Establish the accuracy of the Statement of Affairs lodged in the proceedings

Case 2 – Director Disqualification for trading whilst insolvent and failing to maintain company records.

Director Disqualified for 3 years by an undertaking agreed by the director.

Between 01 October 2018 and 14 June 2019, The Disqualified Director caused The Dissolved Company to take deposits and advance payments totalling at least £181,856 from 5 new customers for works that it failed to complete. Furthermore, these customers were put at unreasonable risk given that the company was insolvent at the time those deposits and advance payments were made to DC, in that:

• By 01 October 2018, DC was insolvent in that it:
• a) Had assets totalling £2,946.32 comprising the balance in the company bank account
• b) Owed £57,580.32 to 8 trade creditors
• c) Owed £24,545 to 3 customers who had cancelled contracts
• d) Owed £10,000 to 1 customer where DC had cancelled a contract itself (on 24 September 2018), The Disqualified Director telling the customer that DC was in severe financial difficulties and didn’t have the man power or money to finish the build.

The Disqualified Director caused DC to continue trading post Winding-up Order and caused £35,058 of the £181,856, to be paid into the account used by DC, after DC was placed into liquidation.

• The 5 customers have claimed £101,962 in the liquidation.
• The Disqualified Director failed to disclose assets totalling £35,058, to the Official Receiver, being payments made by 2 customers, to the account used by DC, between 10 May 2019 and 14 June 2019. £25,867 of this amount was used for cash withdrawals, payments to The Disqualified Director, payments to third parties and personal expenditure. The remaining funds were used for company expenses.”

Case 3 – Director Disqualification for trading whilst insolvent and making personal payments.

Director Disqualified for 5 years by a director signed undertaking.

The Director Disqualified caused The Insolvent Company to enter into a transaction, the transfer to himself from The Insolvent Company on 01 April 2021 of a property with a recorded value of at least £240,000 with an associated debit applied to his director’s loan account on 30 June 2021, that was to the detriment of The Insolvent Company other creditors at a time when The Disqualified Director knew, or ought to have known, that The Insolvent Company was insolvent.

• The Insolvent Company last accounts filed at Companies House, to 31 December 2019, approved by the director on 31 December 2020, showed a loss before tax of £9,726 and net current liabilities of £259,226, with total net assets of £91,659, the latter taking into account a land & buildings asset of £350,408;
• The land & buildings asset concerned, a property in B Road, was purchased by The Insolvent Company for £220,000 on 15 July 2014, according to Land Registry records. The Insolvent Company accountants have indicated that the property was initially purchased for £257,097, that a revaluation was then made of £93,311, bringing the total to £350,408, the figure included in The Insolvent Company accounts;
• Land Registry records show the property was transferred from The Insolvent Company to the director on 01 April 2021, with its value stated as £240,000. The Director Disqualified has provided The Insolvent Company liquidators with a valuation report on the property, dated 22 July 2021, giving a value of £250,000;
• The Director did not make any payment to The Insolvent Company in respect of this property asset, instead the valuation sum used, £240,000, was offset against the amount apparently owed to The Banned Director by The Insolvent Company in respect of his director’s loan account, the relevant journal entry being dated 30 June 2021. The loan account shows a final position of the director owing ORL £1,576, The Insolvent Company Statement of Affairs shows The Director as a creditor for £5,400 in respect of monies introduced in connection with the liquidation;
• As at 01 April 2021 The Insolvent Company had outstanding liabilities to creditors other than The Director Disqualified totalling at least £152,737, that remained unpaid at the date of liquidation;
• The Insolvent Company entered liquidation on 30 September 2021 owing £248,272 to creditors other than The Banned Director.

Case 4 – Director Disqualification for trading whilst insolvent and still taking customer deposits.

Director Disqualified for 7 years by a signed undertaking of the director.

From 08 August 2019 to the date of liquidation, 24/03/2020, the Company Director caused the Liquidated Company, whilst insolvent, to continue to take deposits, or payments in full, without reasonable expectation of providing goods in that:

• Following two years of balance sheet insolvency, the capital account showed a deficit of £37,566 to accounts period ending 31 March 2018. These were signed by the Company Director on 27 March 2019.
• At the end of June 2019, the Company carried a VAT liability of £35,943. This related to periods from June 2017 onwards.
• At the same point, the outstanding PAYE liability was £4,898.
• On 08 August 2019, the County Court Business Centre issued a claim for the sum of £3,366 in favour of a supplier.
• Consequently, a county court judgement was made against the Company on 13 September 2019. A subsequent writ of control was issued on 15 October 2019.
• On 22 November 2019, solicitors acting for another supplier, wrote to the Company re: an outstanding amount of £1,702.
• From 08 August 2019, the disqualified director caused the Company to take either deposits, payments in full or balancing payments. Analysis of documents provided by the liquidator shows that 66 known customers made payments of £42,476.41 of these customers made a claim to the estate for £30,728.