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Director Disqualification for Hotel Director

Director Disqualification for Hotel Director

11 Year Director Disqualification for Manipulating Accounts

The Insolvency Service has reported that Novtej Singh Dhillon, a director of several hotel companies across the country, has been disqualified as a director for 11 years from 14 February 2017, for manipulating the accounts of the companies he was involved in. This led to a Bank suffering a loss of over £31.5 million. His fellow director and former wife, Sarina Thiara Dhillon, was disqualified for 4½ years for her role in the same case.

This article looks at the details of this director disqualification case, where the Insolvency Service acted firmly to disqualify both directors for not ensuring that their company’s financial procedures complied with the law.

The Details of this Director Disqualification Case

The Dhillons were directors of several hotel companies, which entered administration on 20 and 21 September 2012. The hotels that were operated by the companies included: The Paragon Hotel in Birmingham, The Lionsgate Hotel in Kingston upon Thames, The Olde Bell Coaching Inn in Hurley-on-Thames and The Crown Inn in Amersham.

All of the hotels were part of the same bank lending facility and subject to the same cross guarantees. Upon administration, the Insolvency Service’s investigation discovered that the directors had used the companies for personal expenditure which was attributed to director loans in favour of the Dhillons.

Although the lending facility was subject to strict covenants and the bank was provided with regular management accounts to prove that these covenants were being met, the Insolvency Service investigation showed that the accounts were not accurate and had been manipulated. The year-end adjustments had obscured the personal expenditure and inflated the value of assets giving a false record of the true financial and trading positions of the companies.

As a result, when the companies went into administration, the bank was owed circa £48 million, whilst the secured assets were valued at circa £16.5 million, the difference between the two accounting for the shortfall to the bank of over £31.5 million.

The Insolvency Service Commented on the Disqualifications

Cheryl Lambert, Chief Investigator at the Insolvency Service, said:

“Directors have a duty to ensure that the procedures they construct and oversee comply with the law. Directors who do not comply with this basic obligation can expect to be investigated by the Insolvency Service and enforcement action taken to remove them from the market place.

In this case, Mr Dhillon was responsible for the construction of a long term and complex web of lies, by manipulating the internal financial systems of a group of companies. Additionally, the sale of a very large asset was claimed to be occurring resulting in almost £13m of further lending being made, which were then used within their empire of companies and which allowed the Dhillons to continue to benefit from their continued operation.

In court proceedings relating to Mr Dhillon’s business affairs a judge branded him as a man who ‘regards truth as a merely optional extra when doing business.’ Following the Insolvency Service’s investigation I can only agree with that conclusion.”

Our Comment on this Director Disqualification

The severity of Mr Dhillon’s director disqualification undertaking period (11 years) is no surprise given the long term deceit that he perpetrated with the bank for his and his former wife’s benefit. Indeed, an objective observer might struggle to see why a maximum period ban (15 years) was not imposed in this case.

Directors have to ensure they comply with the legal requirements of being a company director, one of which is to keep accurate and true accounting records of their companies.

Our director disqualification solicitors are experienced in defending directors who are threatened with disqualification. We have a strong record of convincing the Insolvency Service to either drop the threat of disqualification or reduce the length of a disqualification. Take a look at some of our testimonials.

If you are being threatened with director disqualification, or a client is, then please contact us or call us on 0121 200 7040 for a FREE initial discussion. No hole is too deep for us to make a difference, but the sooner we talk, the better.

More than Director Disqualification – Director Goes Straight to Jail

More than Director Disqualification – Director Goes Straight to Jail

Director Handed 33 Week Prison Sentence for Accounting Records Failures

In recent months we have commented on several Insolvency Service investigations that have resulted in lengthy director disqualification periods for directors of insolvent companies who have failed to preserve company books and accounting records. In this article, we look at how the outcome of The Insolvency Service’s investigations into the conduct of Mr William To (‘Mr To’) and his three restaurant management companies went beyond director disqualification. In this case the outcome was a 33 week prison sentence for Mr To for accounting records failures.

Director Disqualification

33 week prison sentence for accounting records failures

The Background to this Case

Mr To, director of BMBQ Ltd, Shef Ltd and Broads Cat Ltd (‘the Companies’) was subject to an investigation by the Insolvency Service following the compulsory liquidation of all three Companies in July 2012.

Preliminary investigations found a combined, unpaid, debt of £302,105.89 owing to HM Revenue & Customs. Following this, it was discovered that Mr To had failed to comply with his duty under section 386 of the Companies Act 2006 (‘the Companies Act’) to ensure that adequate accounting records of the Companies were kept. As a result of this, the records were unavailable to be delivered up to the liquidator as was required.

The absence of these records also prevented the Insolvency Service from accurately investigating the reasons for the failures of the Companies.

As a result of his conduct, Mr To has been sentenced to 33 Weeks imprisonment after pleading guilty to three counts of failing to preserve company books and accounting records for a period of three years, for each of the Companies.

What the Insolvency Service Said

Simon Button, Deputy Chief Investigation Officer at The Insolvency Service stated that:

“The Insolvency Service and The Department for Business will take firm action when we find that Office holders of limited companies have clearly failed to comply with their legal responsibilities and this has led to an undermining of the Insolvency Regime.”

He went on to say that Section 386 requires:

Every company [to] keep adequate accounting records. Adequate accounting records means records that are sufficient: (a) to show and explain the company’s transactions; (b) to disclose with reasonable accuracy, at any time, the financial position of the company at that time; and (c) to enable the directors to ensure that any accounts required to be prepared comply with the requirements of this Act.”

Comment

Had Mr To complied with his duty under section 386, the Insolvency Service would have been able to complete their investigations and Mr To would have avoided the loss of his liberty and the reputational damage caused by it. This case is a stark reminder to company directors of their duties under the Companies Act and the potential severity of the action the Insolvency Service will take for a failure to comply with them.

If you have any questions regarding your duties as a company director, and the effect of non-compliance in any case, please contact us or call us today on 0121 200 7040 for a FREE, no obligation initial chat. Our Director Disqualification and Insolvency Claims and Litigation solicitors will be pleased to hear from you.

Birmingham Law Society Awards 2017 – The Results

Birmingham Law Society Awards 2017 – The Results

Our team of Director Disqualification and Insolvency Law Specialists just misses out on the top prize

Last Thursday night at the Birmingham Law Society Awards, 2017, our team of director disqualification and insolvency law specialists arrived at Birmingham’s ICC full of hope that we might convert being shortlisted in two categories into at least one win. Sadly, it wasn’t to be: we weren’t quite able to get over the line as we did in 2016, when we won small law firm of the year. That said, being shortlisted in two categories – small law firm of the year and partner of the year – was no mean feat. So we would just like to congratulate the winners in our two categories and look forward to next year!

We were Shortlisted in 2 categories and we had a great time!!

The Birmingham Law Society Awards started in 2002 and have become a central part of the year for the legal sector in the Birmingham Area. There are 12 categories and once you have been nominated, there is a rigorous process to be shortlisted and then another judging process to be chosen as the winner. It’s a bit nerve-wracking waiting for the winner’s name to be announced, and momentarily disappointing when it’s someone else’s name that is read out. That soon passes, of course, because we must be doing something right to be shortlisted in the first place!! Hopefully that is borne out by the testimonials we get.

Here’s a few pictures of our team enjoying themselves at the Awards, letting their hair down and forgetting for a while about director disqualification, misfeasance and insolvency claims.

 

Director Disqualification

Neil, Sukhbir, Kunal and guests

Director Disqualification

Hilary, Kunal, Sukhbir and guests

The guest speaker/compere was the BBC’s former Chief Political Correspondent John Sergeant. He entertained us with some drily witty stories of his time at the BBC, including his withdrawal from Strictly Come Dancing when it looked like he was going to win!!

Director Disqualification

Richard, Kunal, Gulshan and guest

Direcror Disqualification

Sam, David, Neil, Gulshan and guests


Being Recognised by your Peers for Your Work is Most Welcome

Being shortlisted in two categories by the Birmingham Law Society means that our work is recognised by our colleagues and peers and that is most welcome. What matters most, of course, are the results that we deliver for our clients. Here are some of our Testimonials and Case Studies.

If you are facing a Misfeasance Claim (or other recovery action), Director Disqualification,  or related insolvency difficulties, then please contact us or call us on 0121 200 7040 for a free initial chat. No whole is too deep for us to make a difference, but the sooner you make contact, the better.