In this article, our Director Disqualification Solicitors take a closer look at some recent developments in Director Disqualification law and practice, including outcomes in specific cases (as well as examples of successfully defending against Director Disqualification investigations by our team) to include:
- Imprisonment.
- Suspended imprisonment.
- Director Disqualification.
- Director Disqualification Compensation Orders (‘DDCO’).
- (Failed) applications for Permission to continue acting as a Director or in the management of a company, under section 17 of the Company Directors Disqualification Act 1986 (‘CDDA’).
We also feature some case studies where we have successfully defended clients who are being investigated by the Insolvency Service.
We look first at some recent BBL outcomes.
The passage of time since BBL funds became available in 2020 means that many cases of alleged BBL fraud are now coming before and being decided by the Criminal Law and Civil Law Courts in England and Wales.
This article looks at:
• Some of the decisions relating to BBL fraud/misuse
• The wider picture in relation to Director Disqualification Investigations (‘DDI’) and what types of Unfit Conduct the Insolvency Service (‘IS’) is investigating
• Some key takeaway points for Directors and those advising them
• What value can NDP add to the Director’s position?
BBL’s and Director Disqualification: Why They Dominate this Director Disqualification Landscape
Some key statistics:
- Lenders have flagged that about £1.9 Billion of BBL’s were drawn down fraudulently (a likely under estimate).
BBL’s – a few recent examples
– CRIMINAL PROSECUTIONS – BBL misuse. RV Cooper (‘C’) – Crown Court at Leeds – GO STRAIGHT TO JAIL
- C as the Director of the company submitted an application for a BBL claiming her business turnover was £225,000 per annum; it was in fact £15,000. A gross overstatement.
- A £50,000 maximum BBL was received by the business. The true BBL entitlement was £4,000 (based on the true turnover).
- The £50,000 loan was spent on personal expenditure and dissipated over a 9-day period.
- C went bankrupt on her own Bankruptcy Petition.
Outcome
His Honour Judge Singh imposed an immediate prison sentence (not suspended) of 15 months, emphasising the need to protect the public purse.
Comment
The Court saw this as a blatant case of dishonesty.
– BBL MISUSE: A criminal case. R V Chowdary (‘C’) and Mahboob – Crown Court at Guildford – IMPRISONMENT ORDERED BUT SUSPENDED PRISON SENTENCE
The facts
- On 01 July 2020 C applied for a BBL on behalf of his sole trader business for £50,000. His application was successful.
- C set out in the application seeking the BBL, that his business turnover was £200,000.
- Following receipt of the maximum £50,000 BBL, the money was transferred away to C and his family in the space of 3 weeks.
To compound matters, C was also a Director of UK Media Kit Hire Limited (‘MKHL’) incorporated in February 2020. He applied for a further BBL and received £50,000 the same day, claiming its turnover was £200,000. The money was again paid away to C and his family over a short period of time.
- C was criminally prosecuted and charged with fraud by false representation and with money laundering offences contrary to section 327(1) of the Proceeds of Crime Act 2002.
- C was sentenced to 24 months imprisonment, suspended for 22 months because the Defendant suffered a serious medical condition and he had caring responsibilities for his children. The Judge also imposed a Director Disqualification ban of 7½ years.
– A Civil Disqualification Case – SOS V GUJA (‘G’) – 2024 (ROXY CONTRACT LIMITED)
The facts
- G was the sole Director of the company. He applied for 3 BBLs for the same company. The rules allow only 1 application per company. The declared turnover for at least 2 of the 3 applications were false. A total of £145,000 was paid to the company from 3 different Banks.
- At least 2 (possibly all) of the 3 declarations were false. No explanation was forthcoming as to what became of the £145,000 that has been loaned to the company. It was not available at liquidation.
- The matter came before ICC Judge Prentis. The Director was disqualified for 13 years and ordered to pay Compensation to the Secretary of State (‘SOS’) for the benefit of 2 of the 3 lending Banks totalling £107,038 (including interest). G was also ordered to pay the SOS legal costs.
– A civil case – THE SOS FOR BUSINESS AND TRADE V MINTO ST.AIMIE [2024] EWHC 3137 (CH)
The facts
- In May 2020 the company applied for a BBL from Barclays Bank. Another case of overstated turnover in the BBL application form where turnover was said to be £100,000. In the relevant period the turnover was in fact £41,830.
- The company received £25,000 as a BBL based on the inflated turnover figure.
- Director Disqualification Proceedings were commenced, and the case came before Deputy ICC Judge Parfitt. D was disqualified for 8 years by the Judge but the Judge declined to make a DDCO.
- On compensation, the Judge refused to make an Order for Compensation because the SOS had not raised the issue of the dissipation of the funds in its allegation against the Director. Further, dishonesty had not been alleged. Those matters could not therefore be considered in in relation to the DDCO.
- D was however ordered to pay the legal costs of the SOS’ application to disqualify.
Comment
The clear message here is that if the SOS wish to allege dishonesty, that matter should be set out in the allegation of Unfit Conduct made. The Director is entitled to know the precise case that he/she has to meet. Similarly, if there is evidence that the Director benefited from a BBL, that must be made clear in the allegation by the SOS. The SOS owes a well established duty of fairness in its dealings with the Director.
Other recent non-BBL Director Disqualification decisions
– RE: Insight Developments and Consultancy Ltd [2025] EWHC 284 (CH) – SOS v Roderick – A Director Disqualification win for NDP – (March 2025)
The NDP Team successfully defended Director Disqualification Proceedings against our Director client at Trial. The High Court ruled no misconduct by the Director.
NDP Director Neil Davies and Solicitor Tom Clinton worked on the defence case which led to the Director overcoming allegations of serious impropriety made against him. Specifically, breach of contractual duties as between the company and a Government organisation, the Education and Skills Funding Agency (‘ESFA’). The Judge found the Unfit Conduct allegations to have been made without sufficient evidential basis. We had invited the SOS as Claimant to withdraw the case before Trial. The SOS via the IS did not do that. Instead, the Trial proceeded.
Outcome
The Court agreed with our conclusion. The IS case was dismissed. The SOS was ordered to pay our Director client’s defence costs. This was a case that should never have got to a contested final hearing. As a result of the Trial outcome, our client can continue to be a Director and be involved in the management of a limited company without inhibition.
– SOS V Kahn (‘K’) (tax fraud) – A Civil Director Disqualification case
Allegation of unfit conduct
The SOS Unfit Conduct allegation was that K, as the Director, caused or allowed the company’s involvement in supply chains that resulted in the fraudulent evasion of VAT by one or more members of the supply chain. The case was unsuccessfully defended by K at final hearing.
Outcome
The Director was found not to have followed well established and well publicised guidelines in his trading activities that might have avoided such an outcome. The disqualification of the Director for a significant period (11 years) was perhaps thus inevitable given that finding by the Court.
– Failed Permission application – section 17 of the CDDA 1986 – Wilson v Secretary of State for Business and Trade [2025] EWHC 691 (CH) – February 2025
Overview
- Directors can, despite Director Disqualification, on successful application by the Director to the Court, obtain Permission to carry on as a Director and/or in the management of a limited company business (albeit often subject to Conditions).
- Permission to act/be involved in management, was denied in this case, however.
- This case demonstrates the basics of what must happen if a successful Permission application is to be pursued, to include:
- The Crown debt position (Returns and Payments) of the company in respect of which Permission is sought, must be up to date/brought up to date.
- The company must be demonstrated to be solvent.
- Sufficient and adequate conditions/protections, to safeguard the Public Interest, must be offered by the Director. In practice these can and should be agreed with the IS before the matter gets anywhere near the Court hearing to determine the Permission application, so that at Court the Court is being asked to endorse a position that is agreed between the Director and the IS, subject always to the ultimate decision of the Court.
- The written evidence of the Director, in support of the application, must be transparent, clear and true.
Outcome
The application for Permission in this case ultimately failed. ICC Judge Barber rejected the application.
Comment
Nothing annoys a Court more than having a case before it that is a procedural or factual mess. Prepare properly. Evidence from the Director must address all necessary points. It must be transparent. It must be accurate and truthful. We look deeper into Permission applications in relation to another case, SOS v Dharas CR-2021-002445 – see below.
– Accounting record failures: Failure of the Director to preserve or maintain adequate company accounting records and deliver them to the Liquidator – RE: HOPE & PRIDE LIMITED (‘HOPE & PRIDE’) – March 2025
- Jenna Lennon was the Director of Hope & Pride when it went into insolvent liquidation in September 2023.
- HMRC estimated Hope & Pride owed more than £300,000 in unpaid Corporation Tax at the time of liquidation.
- Hope & Pride entered insolvent liquidation in September 2023 but Jenna Lennon had failed in her statutory duty as a company Director, to preserve and maintain adequate accounting records.
- No Accounts for Hope & Pride were ever filed at Companies House.
- Jenna Lennon also failed to deliver the company’s accounting records to the Liquidator as she was required to do so.
Outcome
- Jenna Lennon has been disqualified by the Civil Court as a company Director for 7 years.
- An IS spokesperson said:
‘Directors are legally required to maintain adequate books and records which show and explain their company’s transactions. This is first and foremost to protect consumers and other businesses who have dealings with the company.
Jenna Lennon did not maintain adequate accounting records for Hope & Pride.
This has meant the Liquidator has been unable to properly investigate the company’s accounts and accurately establish how much was owed to HMRC and other creditors.’
- Jenna Lennon’s failure to maintain or deliver up adequate accounting records meant the Liquidator was unable to verify the nature of the company’s income and expenditure.
- Payments of £1,133,964 out of Hope & Pride’s Bank account were also not explained and the Liquidator was unable to establish if this money was used for legitimate trading purposes. Hope & Pride entered liquidation with total liabilities, which Jenna Lennon had not disputed of £327,923.
– Employing illegal workers: Director Disqualification win for NDP – DDI abandoned re: alleged employment of illegal workers (March 2025)
Summary
NDP persuaded the IS to abandon its DDI against our Director client who had been issued with Home Office Penalty Notices in relation to the alleged employment of illegal workers in breach of the Immigration, Asylum and Nationality Act 2006.
The allegation of Unfit Conduct alleged:
‘• The company did not comply with its statutory obligations under the Immigration, Asylum and Nationality Act 2006 by employing 2 people, one of which was found employed on 2 separate occasions. The 2 people did not have the right to work.
• Following visits from Home Office Immigration Officers on two separate occasions, during which these breaches were discovered, the company was issued with 2 penalty notices requiring the company to pay tens of thousands of pounds in fines. The penalty in relation to the first visit was paid and the second penalty remained unpaid in respect of the second visit.
• The Director was in office as a Director of the company at the time of the Home Office visits.’
Outcome
Director Neil Davies worked on the case which led to the Director successfully responding to and overcoming the above IS allegations.
The IS withdraws its investigation and no further action was taken.
The IS on the face of it (perhaps understandably) saw a case to investigate and pursue; NDP explained the true factual position to the IS. That persuaded the IS that it had got it wrong here and had insufficient evidence to support its allegations.
– Unfit conduct alleged – taking customer deposits, liquidating and not delivering goods and services – DWH trading ltd – 2025
- A married couple as Directors took deposits of £69,750 for furniture orders from customers.
- The goods ordered by customers were never delivered. The customer deposits went unreturned. The company went into insolvent liquidation.
- Both Directors received 7 year Director Disqualification bans.
– SOS V Dharas Cr-2021-002445 and Cr-2023-006602 – A 2024 Case for NDP with a successful outcome for Permission to Act following an 11 year disqualification
STOP PRESS: NDP’s Director client was granted Permission on his application to the Court to continue to act as a Director, following his Director Disqualification Undertaking of 11 years.
Overview
This was a truly outstanding outcome for our Director client. A fuller note of this case will follow. We are not aware of any earlier instance of a Director disqualified for 11 years, successfully applying to the Court for Permission to continue acting as a Director and in the continued management of a limited company entity.
Background
The underlying disqualification case involved a serious allegation of incidental involvement by the Director in Fraud against HMRC. The events complained of in the underlying disqualification action took place back in 2004 to 2006. Our client had run his successful trading company, in respect of which he now sought Permission to Act, since the late 1990s.
That company would likely fail unless he obtained Permission from the Court. His employees would lose their jobs.
Law: the application to Court for Permission by the Director
Pursuant to section 17 of the CDDA, an individual may apply for Permission from the Court, to continue to act as a Director of a company and/or be involved in the management of a company, despite having been disqualified as a Director.
When and in what circumstances will the Court grant permission?
The Court has a wide discretion to grant Permission (on application to it by the Director) including subject to the imposition of Conditions, having considered a number of competing factors, with each Permission application dealt with on a case-by-case basis. An objective in granting Permission is for the Court to ensure the Public Interest is adequately protected, if Permission is granted.
Our Director client faced a stark choice. Risk financial ruin by unsuccessfully opposing the Director Disqualification case at final hearing in November 2023 or agree to be disqualified (unjust as that felt to our client) and then seek Permission. This dilemma is one commonly faced by Directors.
The objective
The client having acknowledged the seriousness of the allegations against him, reflected in the lengthy 11 year disqualification period, his focus now switched to the need for him to obtain Permission to continue as a Director of his ongoing, long established and successful business.
Safeguards and conditions proposed to protect the public interest
Safeguards were proposed by NDP on behalf of our client to satisfy any concerns the Court may have about ensuring the Public Interest was adequately protected.
Permission granted – what conditions?
The Court on these specific facts granted Permission to act to our client, until a hearing in June 2025 when that matter will be reviewed.
In this case, the Court imposed the following Conditions as part of the successful Permission application:
- The appointment of 2 other Directors to the company to include the appointment of a qualified Accountant as financial Director of the company.
- The company agreed to move its bookkeeping and accounting systems to the online accounts package ‘Quickbooks’, so as to give full and unrestricted access to the company’s external Accountants to the company’s books and records.
- Monthly Management Accounts to be prepared by the external Accountants and provided to the Directors within 4 weeks of each month end.
- The Accountants to report to the Directors of the company any concerns or defects in the finances of the company which they have whilst examining the accounting records of the company during the process of preparing Management Accounts and shall require that such concerns or defects are rectified.
- Annual Returns and Statutory Accounts for the company to be filed at Companies House by their due date for filing.
- All returns to HMRC for VAT, PAYE, NIC and CT for the Company to be submitted by their due date and any payment due in respect of any liability for such VAT, PAYE, NIC and CT to be paid on or before the due date of payment.
The key
Whenever Permission is granted by the Court, that Permission will automatically lapse if any condition is breached by the Director, leaving the defaulting Director in breach of the Disqualification Order – a Civil and Criminal offence. Great care is thus needed to ensure Conditions are observed to the letter and not breached.
Cautionary note
The Director must never assume Permission will be granted by the Court. The Court process is not a rubber-stamping exercise. The Court will look critically at each case on its own merits.
Neil Davies co-authored an article on this topic that appeared in ‘Insolvency Law and Practice’ in February 2023.
Evidence and explanations: key takeaway points
- It is crucial that Directors should take legal advice as early as possible as the IS does not know the Director or his/her side of the story at the point when it launches its investigation. That’s where we come in, to guide the Director through the process and put forward explanations to the IS within the DDI and defend the position.
- DDI and DDP can have serious consequences, including banning individuals from holding directorial positions and being involved in the management (very widely defined), promotion and/or formation of a limited company for between 2 to 15 years, without the prior Permission of the Court.
- DDI and DDP are in our experience most suited to allegations of Unfit Conduct that are on the face of it, more easily proved (at least on the face of it) such as (for example):
- Failing to keep, maintain, preserve and/or deliver up company records to the Liquidator of the company.
- Failure to comply with statutory obligations such as to file Tax Returns or failing to pay due Tax.
That is not to say that more complex allegations are incapable of successful pursuit by the IS in DDI – anything but – the IS must however be very clear and precise in what is alleged against the Director.
Defending against Director Disqualification? What can NDP add to the Director’s position? – potential Director Disqualification outcomes? A fresh pair of legal eyes – what outcomes might be achieved?
– SOS v Roderick (see above)
This is one of many we are asked to look at, where the client already has Solicitors on board and in place. We reviewed the case. It may be that on a review we have nothing further to add and if so, we will tell you that. Often however we do take cases over from other Solicitors and add real value to the matter, achieving one or more of the following outcomes:
• An abandoned IS investigation (perhaps because of a Meeting with the IS). The potential benefits of a meeting with the IS should not be underestimated.
• A lower period of Director Disqualification achieved by negotiation with the IS, than that offered.
• An abandoned Director Disqualification case (for example where proceedings have already been issued).
• A successful outcome at final hearing (as in this case).
• A successful Permission to Act application by the Director, post disqualification.
The lower the period of disqualification, the more likely that a Court will be to grant a well presented Permission application, albeit subject to conditions.
• Avoiding or limiting the financial impact of a DDCO against the Director.
Take a look at Covid loan misuse allegations and enforcement outcomes.
Contact our Director Disqualification Specialists today
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(*Article by: Neil Davies, Solicitor and Managing Director of NDP and Contributory Editor to ‘Mithani: Directors’ Disqualification’ – the leading work on Director Disqualification law and practice, with contributions from the wider NDP Insolvency and Director Disqualification Team.)
