Do you take……?

You will have no doubt seen recent press coverage of a Gloucester based bridal-wear company which had ceased trading and has subsequently gone into liquidation. Based on the press reports, numerous clients have paid deposits on bridal wear for their special day, and some have paid in full. For the directors, a meeting of creditors beckoned, and likely further local press interest in their apparent misdemeanours; for example, not ring-fencing client deposits and/or utilising client monies to fund trading.

This situation provides a stark reminder that running a business by utilising customer monies will all too often end in tears for all concerned. The message to directors of such businesses is ‘do not take deposits’ unless these are placed in a separate client account for that purpose, or otherwise ‘protected’. Failure of the business may not only incur the wrath of customers and the local community but also claims by the liquidator, disqualification from acting as a director and a possible criminal prosecution. In fact, the government announced in March 2015 that ‘The Secretary of State will have new powers to seek a compensation order against a disqualified director where misconduct for which they have been disqualified has caused identifiable loss to creditors’, with those powers to be implemented over the coming year or so. The regime is set to become more rigorous.

The message for directors is clear, expend customer and client monies at your peril; and if your business cannot afford to ‘ring fence’ those monies, then question whether that business is in fact sustainable. Contact us.