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.