Client Testimonial Demonstrates that Director Disqualification can be Avoided in Crown Debt Cases, if the Right Advice is Taken
There is a perception that director disqualification investigations cannot be defeated when Crown Debt is involved. This article looks at a recent Crown Debt case, lead by our team of insolvency solicitors, in which we convinced the Insolvency Service to abandon its investigation, leaving our client overjoyed at the outcome.
The Details of this Director Disqualification Case
Our client’s Company went into liquidation owing c.£70,000 to its creditors. Of that sum, HM Revenue & Customs (‘HMRC’) was owed £60,000, a glaring red flag to the Insolvency Service (‘IS’) that resulted in them commencing a director disqualification investigation into the conduct of our client and his co-director. The single Allegation of Unfit Conduct was that the directors had caused or allowed their Company to ‘Trade to the detriment of the Crown’, a seeming slam dunk for the IS. Crown debt cases very often end up in a ban for the director.
In circumstances where the other director could not be traced, our client became the sole target for the IS. He had already resigned himself to a period of disqualification when he found NDP’s website following a Google search. He quickly contacted us, a decision that proved to be crucial in bringing the disqualification investigation to an end.
We Prepared to Undermine the Insolvency Service’s Case
Having spent time carefully analysing the IS’s evidence, We carefully crafted the client’s detailed representations and systematically set about undermining the IS’s case. It soon became apparent that the IS had failed to look beyond the headline HMRC debt and had not investigated all the circumstances of the case, in accordance with its obligations. This proved to be the key fact of the case.
Getting the Message Across to the IS was Key
A detailed letter of representation was sent to the IS, explaining why director disqualification was not appropriate on the particular facts of this case. That involved many hours with the client, understanding what had happened in the Company and setting out the full and true picture of events.
We were able to demonstrate that it was not necessary, expedient or in the public interest (the key Legal Test) for director disqualification proceedings to be issued against the director.
The success in this case (as ever in any such case) turned on its own particular facts, with Suky successfully arguing that the existence of a debt to HMRC did not itself justify a ban. The HMRC debt could not be looked at in isolation and in ignorance of the wider circumstances that gave rise to the debt. As a result, the Insolvency Service abandoned its investigation.
Our client was overjoyed at the result
‘‘I really was not expecting this outcome. I am so grateful to NDP. They were on my side from the beginning and fought hard to make this all go away. I had given up before we started, but NDP did not. I can now draw a line under what has been an horrendous 7 months.’’
Not only has our Director client escaped a significant period of disqualification, but with our team’s expertise and skill, he has avoided director disqualification and preserved his ability to trade his current limited company.
Key facts arising from this case
- Disqualification is not the inevitable consequence of a director disqualification investigation by the IS.
- The Director should use the time before the commencement of court proceedings by the IS (his/her window of opportunity) to tell the IS the full details of the case. The IS inevitably only have a part view of what went on in the last months of the life of the Company.
- Whilst owing Crown Debts is the single most common allegation of ’Unfit Conduct’ relied on by the IS, such debt by itself does not mean director disqualification is inevitable, as this case shows.