The teeth of the regulatory system

The Insolvency Service recently reported on the circumstances resulting in a director disqualification of eight and a half years, a substantial period albeit by way of an undertaking from the director. The Insolvency Service investigation found that the director had failed to properly deal with company tax affairs, particularly in regard to VAT, and failed to ensure that adequate and complete accounting records were maintained by the company.

It was discovered that VAT in excess of £500,000 was neither reported nor paid to HM Revenue & Customs, that the company’s internal records were not maintained properly and that in excess of £1,100,000 of payments to the director and parties connected to him were identifiable but not explained. The misappropriations occurred over a 3 year period prior to liquidation and came to a head as a result of a VAT repayment claim being investigated by HM Revenue & Customs, which in fact identified a VAT liability of £215,000.

This case demonstrates the teeth of the regulatory system in handing down a substantial disqualification. Without the undertaking, the Court would have made a disqualification order near to the maximum of 15 years. Moreover, misconduct matters over a prolonged period, even though ‘hidden’ within the generality of business transactions, do come to the fore and are pursued by the authorities. The reality is that there can be no escape, and director responsibilities of competency and integrity will be attacked. Director disqualification will follow, as well as claims for monetary compensation and orders under the antecedent transaction legislation available to the Courts. Should readers have concerns in any of these areas, then our experienced practitioners are available to provide advice and explore the options available before matters are compounded beyond control. Contact us.