Cases involving the disqualification of directors for trading whilst insolvent are something like a bus. One never comes for ages and then two come at the same time.
The last couple of weeks has seen the disqualification of two individuals for periods of seven years. In the first case of Mr Russell Gwyn Williams, he was disqualified for “trading to the detriment of creditors” in running his garage repair business (which was already insolvent) for a further seven months incurring further liabilities of £106,000, including some £89,000 for Crown PAYE/NI and VAT. The case was unusual because of the difficulties in proving a date from which knowledge of insolvency can be attributed to the director. Mr Williams may also face further action beyond disqualification in that the Liquidator of his company may well pursue him for misfeasance and wrongful trading which could make him personally liable for the debts of the company from the date that the company should have ceased trading.
In the case of Mr Antony Clive Blakey, the facts are somewhat different. He ran a company, Ultra Green Group Limited (“UGGL”) which went into CVL with an estimated deficiency of £2,770,000. However prior to the liquidation (when the company was insolvent) he transferred the company’s contracts and all of his green energy technologies to a connected overseas company for £1. He then caused UGGL to continue trading and incur new debts of £629,000. Mr Blakey, I suspect, also faces action from the Liquidator which may cost him dear.
It may seem obvious but directors must be aware of the financial position of the companies that they are running. This determines the “knowledge of insolvency” test as once that date has been reached, continued trading could be deemed to be trading whilst insolvent. When working out the financial position it is often a good idea to consider the contingent liabilities of the company such as unexpired lease commitments and employee liabilities. Only when the true picture has been established can a meaningful and proper decision be made.
From our offices in London, Croydon and Bournemouth our Insolvency Practitioners have the experience and skills to assist Directors should a potential insolvency position be reached. All initial advice is free and confidential.
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