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Alleged failure by Director to maintain and/or preserve and deliver up books and records – allegation defeated

This client’s story shows that Directors should always be prepared to stand their ground with the Insolvency Service and explain their position coherently and fully when threatened with Director Disqualification

“I have run a family business for over twenty years.   As much I enjoy it, it is often a stressful way of life and involves working long hours.  Unfortunately, due to cost pressures and the volume of local competition, the family had no option but to place the family business into insolvent liquidation. Following the liquidation of the company, even though I was not formally appointed as a Director of the company, my father and I received letters from the Insolvency Service (‘IS’) stating that they intended to commence Director Disqualification proceedings against us both.  This was a real shock to us both.

The client quickly contacted our Director Disqualification specialists

I immediately contacted a close Solicitor friend who suggested that I speak with Neil Davies & Partners (‘NDP’), as recognised experts in this field of insolvency litigation. I spoke with Sukhbir Mall, Director at NDP.  He was knowledgeable, friendly and helpful.

He explained the nature and consequences of the threat we faced and what I needed to do, to defeat the case against me, in a language that I could understand and that was not overly complicated.”

The De Facto Director allegation

“Crucially, Sukhbir explained to me that unless the IS could demonstrate that I had acted as a Director (even though I was not registered as a Director), then the allegations of Unfit Conduct levelled at me, could not proceed or succeed.

Sukhbir and his Solicitor colleague, Douglas McEvoy, at NDP undertook a detailed analysis of the evidence relied upon to allege that I had acted as a Director. NDP advised  me that the evidence against me was weak.”

The unfit conduct allegation

“Sukhbir put forward a strategy to us that we followed.   He immediately engaged with the IS, with my Accountant and with an insolvency agent that I had used in the period leading up to liquidation.  The allegations against us both, were met and answered head on.”

The detail of the unfit conduct allegation

“Assuming it could be demonstrated that I had acted as a Director, Sukhbir explained to me that the IS then had to prove that we had to  engage in ‘Unfit Conduct’ if we were to be disqualified. The allegation of Unfit Conduct made against us was that ‘We had failed to maintain, preserve or deliver up to the Liquidators  adequate books and records for the company’. 

We did not accept this allegation as true or accurate.  The books and record had actually been delivered up to the Liquidator, but this was not accepted or understood by the IS.

Sukhbir explained to us that the subject matter of this allegation is also a criminal offence, if proved, punishable by a fine or imprisonment.  This was a worrying time.” 

Next steps – evidence gathering

“Sukhbir and Douglas were sensible, pragmatic and focused right from the start.   They applied for, and obtained from the IS, the draft evidence to be relied upon against us.  

Sukhbir identified to us the key issues and explained to us that we needed to gather evidence from third parties.  Witness Statements were prepared for us and for those third parties and then that evidence was put to the IS with a detailed letter of representations.   That is where Sukhbir and NDP came into their own.  They presented a compelling and persuasive letter of explanation to the IS, supported by documents where possible.

Sukhbir explained to us that what constitutes ‘adequate books and records’ will differ on the facts of every case, depending (for example) on the type of business conducted by the particular company.

I worked tirelessly with Sukhbir and Douglas to piece together the required evidence to demonstrate that the unfit conduct allegation made against us, which could potentially have criminal law consequences, could not be successfully maintained or pursued by the IS, on the particular facts of our case.”

The importance of documents

“Sukhbir supported his written submissions to the IS (i.e. as to why we should not be disqualified as Directors) with supporting documents.  The letter of representations explained all the circumstances of the case, to the IS.

The letter contained a lot of factual material that I suspect was new information to the IS.  Sukhbir reminded me that the only people who knew the full story of what went on in the company, was the Directors.  It was vitally important that all such information was communicated in the most effective way to the IS.”

The outcome – the IS discontinue their investigation

“I was overjoyed and relieved when the IS confirmed to NDP that their investigation would be discontinued against my father and I.

The nightmare that I had been living for eighteen months of the IS investigation had finally come to an end and we could once again resume a normal life with our family.   The impact of these disqualification threats on family life and the ability to day to day function, cannot be under-estimated.  This case was a black cloud over us both.   It was my last thought at night and my first thought in the morning.  Sukhbir and Douglas were always available on the end of a phone when we needed a chat.  The importance of that support cannot be underestimated.

Matters were complicated by the fact that my mother had died shortly before the liquidation of the company which added an additional tier of stress to my life.

The team at NDP were supportive, knowledgeable and were clearly extremely comfortable and experienced in dealing with this type of case. The IS were clearly used to dealing with NDP on this type of case.  They are definitely a ‘go to’ firm for Director Disqualification investigations/proceedings and insolvency work.”

KB (Nottingham)

The NDP team’s take on this Director Disqualification case

  1. As ever, documentary evidence to support the Director’s case was vitally important. In this case, that involved obtaining evidence and Witness Statements from the company Accountant and reliance on emails exchanged between the Directors and the Liquidator’s office.
  2. The documents that the IS said were ‘missing’ in this case, had not in fact existed in this company. There was no need for those particular documents to be kept in relation to this particular company.   That took some explaining to the IS, who eventually accepted the position.
  3. The Director should always be prepared to stand his ground with the IS and explain his/her position coherently and fully. Such perseverance does often pay off.

Contact us if you are threatened with Director Disqualification

Our experienced and award-winning team of director disqualification specialists has defended over 200 directors who have been threatened with disqualification. We have succeeded in reducing the length of the disqualification or removing the threat of it entirely in most cases.

If you are threatened with disqualification, act quickly and contact us or call us on 0121 200 7040 for a FREE initial discussion of your case.