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Director Disqualification for not paying HMRC

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Disqualification as a Director for not paying HMRC and not delivering up company records.

This article shows how a lengthy period of director disqualification can be the result when HMRC is not paid and company records are not delivered up properly.

In a recent press release dated 23 March 2015 the Insolvency Service confirm that they obtained a director disqualification order against a director in the County Court at Wrexham. A seven year period of disqualification as a director was ordered by the judge as a result of the company (D & S Poultry Limited (‘the Company’)) failing to pay VAT to HMRC and what is described as non-compliance with the Liquidator to account for, or deliver up, the company’s assets.

It would appear that the director of the Company paid trade creditors ahead of HMRC as well as failing to account for or deliver up assets of the Company worth in excess of £18,000.00.

Why was the Director Disqualification period 7 years?

This case would appear to be fairly standard fare for the Insolvency Service involving as it did non-payment of HMRC debts. However the additional issue of failing to account for or deliver up the company’s assets was seen as being sufficiently serious to take the case into the middle bracket of director disqualification periods. That is the six to ten year director disqualification period bracket derived from the judgment of Lord Justice Dillon in the case of Re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164.

It is interesting to note that Robert Clarke, Group Head of Insolvency Investigations North at the Insolvency Service has two quotes attributed to him for this case focusing only on the accounting records aspect of the case rather than the non-payment of HMRC:

“Directors have a duty to ensure that their companies maintain proper accounting records, and, following insolvency, deliver them to the office-holder in the interests of fairness and transparency.”

“Without a full account of transactions it is impossible to determine whether a director has discharged his duties properly, or is using a lack of documentation as a cloak for impropriety.”

What does this case tell us about the risk of being disqualified as a director?

This case shows the importance, in particular, of maintaining good accounting records, but also delivering these records up to the liquidator as well as accounting for Company assets. Over and above the risk of being disqualified as a director, the director must also consider:

  1. In NDP’s experience such findings/admissions may result in the Liquidator taking action against the director under the Insolvency Act 1986 to perhaps examine him at Court to ascertain the whereabouts of the assets and accounting records under section 236 ; and
  1. The real possibility of an inquiry into the Company’s dealings or perhaps proceedings being brought for, say, misfeasance under section 212  – a summary remedy against delinquent directors due to the failure to account for Company assets, thereby making the director personally liable for the loss to creditors.

We are Director Disqualification Solicitors  and can help if you are faced with Director Disqualification problems

Whether it is director disqualification proceedings, proceedings to examine your conduct as a director or even threatened proceedings for misfeasance there are ways and means for the well advised director to deal with the same.

As specialists in director disqualification, we know from experience that it is always critical that you speak to us as early as you can. We believe that no hole is too deep for us to help, but the earlier you speak to us the more we can do to help. Not least we may be able to keep you away from the stress and cost of going to Court. If you are facing director disqualification problems, please contact us or call us on 0121 200 7040 today for a no obligation no cost chat as to your options.

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