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Director Disqualification for Cleaning Out Funds

6 year Director Disqualification Following Transfer of Company Funds

The Insolvency Service has issued a press release following an investigation that they carried out into the conduct of Ms Natalie Rimondi (‘Ms Rimondi’) as Director of Full Circle Facilities Management Limited (‘the Company’).  The investigation resulted in Ms Rimondi receiving a 6 year director disqualification for ‘cleaning out’ the company’s bank account, even though she knew the company was insolvent, in an attempt to avoid paying the company’s creditors. This article looks in more detail at this case and reminds directors of their duties to creditors if their company becomes insolvent.

The Background to This Case

Ms Rimondi’s director disqualification followed the transfer of Company funds totalling £103,600 to an associated company’s bank account. The details are:

  • On 1 August 2014, a County Court Judgement was made against the Company, and on the same day HM Revenue & Customs (‘HMRC’) wrote to warn the Company of potential winding-up proceedings. Following this, on the 4 August 2014, Ms Rimondi authorised two payments from the Company accounts of £94,400 and £9,200 – a total of £103,600 – respectively to her associated business. This action left less than £50 in each of the Company accounts.
  • On 7 August 2014, the Company formally appointed a liquidator and in doing so Ms Rimondi ensured that her prior actions deprived the Company creditors of funds that should have been available for distribution by the Liquidator.
  • The Company entered liquidation on 03 September 2014 with an outstanding balance of £236,871 owing to the creditors. Had Ms Rimondi not made the transfers on 4th August 2014, then £103,600 more would have been available for distribution by the Liquidator to the creditors.

What the Insolvency Service Said

Sue MacLeod, Chief Investigator at the Insolvency Service, stated that:

“By 4 August 2014, Natalie Rimondi was aware that insolvency proceedings were inevitable. In transferring the majority of the company’s funds to an associated company she deliberately put those monies out of the reach of the creditors.

Her disqualification will prevent a repeat occurrence of this and act as a deterrent to any other directors who are thinking of putting their own interests before that of their company’s creditors.”

Our Comment on This Director Disqualification Case

Ms Rimondi, following the notification she received from HMRC, owed a duty to the creditors in ensuring that Company funds would be readily available for distribution. In cleaning out the Company accounts, the punishment handed to Ms Rimondi was certainly warranted. The case is a stark reminder to company directors of the duties that they owe to their creditors in ensuring that funds are readily available should  a company become insolvent.

If you have any questions regarding the solvency status of your company and your duties as a director, or if you are being threatened with director disqualification, please contact us or call us today on 0121 200 7040 for a FREE, no obligation initial chat. The sooner we talk, the more our director disqualification solicitors can do to help.

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