Director Disqualification Undertakings and Prison Sentences for Two Directors.
In a press release dated 29th July 2015, the Insolvency Service confirmed that two company directors from Middlesbrough, after an investigation by the Insolvency Service, received lengthy director disqualification periods and were also convicted and sentenced to terms in prison for their offences.
What Offences Did the Directors Commit to Receive Director Disqualification AND Prison Sentences?
Mr Arfan Ali Khan (‘Mr Khan’) and Mr Gerard Burns (‘Mr Burns’) were directors of Thornaby Cars Limited (‘the Company’) trading as ‘Royal Cars’ in Middlesbrough. The Company was originally wound-up on 28 July 2010 following a Petition by HM Revenue & Customs (‘HMRC’).
Mr Khan pleaded guilty to a number of offences at Newcastle Upon Tyne Crown Court, including:
- The fraudulent removal of £150,000.00 worth of Company property in anticipation of the Winding-Up of the Company;
- Failing to keep adequate accounting records; and
- Re-using a prohibited Company name (of which, see more below).
Mr Khan was sentenced to 16 months imprisonment and received a director disqualification period of 10 years.
Mr Burns was sentenced for offences (1) and (2) above. Mr Burns was sentenced to 10 months imprisonment (to be suspended for 2 years) and disqualified from acting as a company director for a period of 5 years.
The £150,000.00 was, it seems, transferred to another company to avoid paying HMRC the VAT it was owed.
The Criminal Prosecution for re-using a prohibited Company name
As specialists in Director Disqualification and Insolvency Litigation, what really draws the ‘insolvency eye’ in this case is that of the criminal prosecution for re-using a prohibited company name. The press release states that:
“Mr Khan further continued to us the business name ‘Royal Cars’ previously used by (the Company) when its use had been prohibited for a period of 5 years from 28 July 2010.”
In our experience this offence is a relatively rare matter for prosecution and conviction, director disqualification alone being the more common punishment. Usually the Department for Business will allow the prohibited director the opportunity to rectify the position before they prosecute, so as to avoid criminalising people unnecessarily, so this case shows just how seriously the directors’ offences were viewed.
Further Proceedings, in Addition to Director Disqualification and the Jail Sentences, are On-Going
It does not end there for these directors as the press release confirms that confiscation proceedings are now ongoing (under the Proceeds of Crime Act 2002. Such proceedings are financial claims targeted against the director personally.
In addition the UK based liquidator may also choose to bring Misfeasance Claims proceedings to recover monies from the directors personally (where the confiscation proceedings have not already done so).
The other company to which the assets were transferred may also be facing proceedings from the UK based Liquidator for preference, or transactions at an undervalue for recovery of those monies/assets.
If You are Facing Director Disqualification, Misfeasance Claims or Insolvency Litigation, We Can Help
This case demonstrates how seriously the Insolvency Service and the Department for Innovation, Business and Skills viewed the offences of the two directors. As the Deputy Chief Investigative Officer from the Department for Business, Innovation and Skills, Simon Button said:
“The Insolvency Service and The Department for Business, Innovation and Skills will take firm action when we find that Company Directors have abused the trust that the public expect from them when they hold such a responsible position.
Both Mr Khan and Mr Burns were clearly aware that the money belonged to the company and its creditors, and was not theirs to do with as they wished.”
In circumstances such as these, as director disqualification and insolvency specialists, we usually find that no hole is too deep for us not to be able to help. Acting positively as early as possible is vitally important, and allowing us to help may eliminate the prospect of disqualification, or result in a lower period of disqualification. Please contact us or call us on 0121 200 7040 today for a free no obligation initial chat.