Failing to maintain accounting records is one of the main causes of Director Disqualification.
Failing to maintain, preserve and deliver up accounting records is one of the main causes of director disqualification. We see it all too frequently when companies become insolvent and an investigation by the Insolvency Service is triggered. It is a statutory requirement for directors to comply with under the Companies Act 1985. This article looks at a recent case study where the director of an ice cream company accepted a 6 ½ year director disqualification undertaking for failing to maintain proper accounting records.
The Details of this Director Disqualification Case
Robert Scappaticci, was the director of Manchester based Gerards Ice Cream Company. The company, which also included fast food outlets, went into voluntary liquidation in September 2014, owing over £370,000 to creditors.
What attracted the attention of the Insolvency Service was the discovery that six months before the liquidation, the ownership of one of the company’s fast food outlets, a chip shop, was transferred to a third party. It was then discovered that due to the lack of proper accounting records, it was not possible to verify what the terms of sale were. Neither was it possible to ascertain whether the chip shop business was an asset in the liquidation, and if so to what extent.
Under such circumstances, the Insolvency Service’s view is that it is possible that the creditors at the time of insolvency were not likely to receive some of the money owed to them. As a result, Mr Scappaticci accepted a director disqualification undertaking of 6 ½ years on 5th June 2017, with the disqualification starting on 26th June.
This is what the Insolvency Service said
Robert Clarke, a Group Leader of Insolvent Investigations at The Insolvency Service, said:
“In this particular case, the director transferred a valuable company asset, without ensuring the company operated in a transparent way by providing sufficient records to explain the transfer. As a result, innocent creditors may have lost out.
This disqualification should serve as a reminder to other company directors tempted to operate in a similar way, that the Insolvency Service will rigorously pursue enforcement action and seek to remove them from the market place.”
Director Disqualification is a Serious Punishment
In addition to the reputational damage that a director suffers upon disqualification and the likely stress that it causes to his/her family, a director who is disqualified cannot:
- act as a director of a company
- be a receiver of a company’s property
- directly or indirectly, take part in the formation, promotion or management of a company or limited liability partnership
Only with specific permission of a Court can a disqualified director act as a director in the above three areas. Breaking the terms of a disqualification is a serious offence which can lead to further disqualification and, in some cases, imprisonment, as this news story shows.
Contact Us if You Are Disqualified and Wish to Apply for Permission to Act as a Director
Our team of director disqualification solicitors are experienced in defending directors faced with disqualification. We have a strong track record in reducing the period of time directors are disqualified for and also of persuading the Insolvency Service to drop their investigations. See some of our testimonials and case studies.
Contact us or call is on 0121 200 7040 for help and advice if you are facing disqualification or need to apply for permission to act if already disqualified. The sooner we talk, the more likely it is that we can help.