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Director Disqualification for not Keeping Accounting Records

Director Disqualification for Binning Company Accounting Records.

This story demonstrates that breaching the duties of directors is regarded as a very serious offence and can end up in director disqualification, as in this case for ‘binning’ company accounting records and for failing to pay money owed to HMRC and the local council totalling over £180,000. Here we look at the details behind this case and suggest an option that might be open to the disqualified director to continue acting as a director.

The Details of This Director Disqualification Case

This case is detailed in a recent press release from the Insolvency Service, which confirms that Claire Fraser, a director of CAF (Scotland) Ltd (‘the Company’) gave a Director Disqualification Undertaking,  thus agreeing to be disqualified as a director for a period of 6 years commencing from 21 April 2016.

The Company ran a number of bars in the Fife area of Scotland.  Ms Fraser was the sole director of the Company. A Winding-Up Order was made against the Company on 13 August 2014 following a Winding Up Petition from Fife Council for non-payment of business rates  totalling £130,746.

The Company was Also Trading to the Detriment of HMRC

It is reported that the Company fell into arrears with the payment of its business rates from March 2013.  However, from March 2013 to the date of the liquidation it was found by an Insolvency Service investigation that trade creditors and suppliers were paid whilst no payments were made to Fife Council or H M Revenue & Customs (‘HMRC’) for taxes due. HMRC were found to have been owed £25,985. The overall deficiency to creditors was estimated to be £186,732.

It was also found that accounting records were not provided to the liquidator sufficient to explain:

  • the purpose of payments totalling £186,127 that were paid out from the Company’s bank account;
  • what cash sales were generated by the 4 bars operated by the Company;
  • what other debts may have been left owing by the company – including to HMRC for Value Added Tax;
  • what wages and benefits were taken by Ms Fraser; and
  • the exact dates that the Company commenced and ceased trading.

Therefore, Ms Fraser was found to have failed to make payments of taxes due to HMRC, business rates to Fife Council and did not preserve the accounting records of the Company.

Our Comments on this Director Disqualification Case

The failure to pay taxes due by the Company is in our experience one of the most common grounds which the Secretary State for Business, Innovation and Skills relies on in seeking a director disqualification order.  That failure was aggravated here by the failure of the Company to pay business rates or tax due to HMRC for over a year of trading.

In addition, Company accounting records were not delivered up to the liquidator with the consequences as set out above.  That failure by itself was probably sufficient to attract a director disqualification investigation and enough to warrant the making of a disqualification order.

Contact us if You are Facing Director Disqualification

As director disqualification specialists, we regularly defend directors facing disqualification. One option that Ms Fraser may have is to make an application under section 17 of the Company Directors Disqualification Act 1986 for permission to act as a company director. We  regularly make successful applications to the Court to obtain permission for the director to continue as a director, even once disqualified. Click here for more information.

If you are facing director disqualification, it is always the case that the earlier you seek and obtain legal advice when you are first written to by the Insolvency Service regarding a planned investigation the better. That is so that we are better able to advise you as to your options and the way forward.

Why not contact us or call us today on 0121 200 7040 or email us at law@ndandp.co.uk with a copy of the letter that you may have received from the Insolvency Service investigating your conduct. When you initially speak to NDP it will be at no cost and no obligation to you. No hole is too deep for us to make a difference!

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