Insolvency Services News
Convenience store director disqualified 11 years for using fraudulent means to remove funds from the company?s account and to obtain goods on credit.
Naeem Javed was a director of Petal (Scotland Ltd (PSL) , from 2004 until the company ceased trading on or around 20 July 2016 and went into liquidation on 29 November 2016.
Once the company entered liquidation, Mr Javed failed to deliver up the company?s accounting records as required by insolvency law. This hampered the investigation and the potential recovery of assets for the benefit of creditors.
An investigation by the Insolvency Service, following the conclusion of the liquidation, found that between 23 December 2015 and 31 December 2015 Mr Javed removed funds totalling ?85,000 which had been obtained through false indemnity claims resulting in a loss to the company?s bank.
It was also found that between 13 April 2016 and 31 May 2016 Mr Javed used the company to obtain Marks & Spencer gift cards on credit, at a time when the company had unpaid liabilities of at least ?161,077 and insufficient funds to pay for these. This resulted in a loss of ?90,000 to the creditor.
On 27 April, Mr Javed gave an undertaking to the Secretary of State for Business, Energy & Industrial Strategy, which, from 18 May 2018, prevents him from directly or indirectly becoming involved, without the permission of the court, in the promotion, formation or management of a company or limited liability partnership for 11 years.
Robert Clarke, Head of Company Investigation at the Insolvency Service said:
The Insolvency Service will rigorously pursue company directors who deliberately defraud their stakeholders for their personal gain. Fair treatment of business partners and creditors is essential for business confidence which is, in turn, essential for economic growth.
The substantial period of the undertaking agreed illustrates that Mr Javed has paid the price for his conduct, and cannot now carry on in business other than at his own risk.
Three directors of a debt management company have been banned from running companies for 29 years.
Robert Michael Solloway, Mark James Harrison and Richard Ian Mott, were all directors of RMR Financial Services Limited, which traded as Compass Debt Counsellors, a debt management company.
Robert Solloway served as a director throughout, while Mark Harrison and Richard Mott were directors at various times throughout the life of the company.
The company traded from offices in Nottingham and attempted to assist people to get out of debt. Clients made monthly payments to the company for a fee with the expectation that their payments would be made to their creditors.
The company was placed into voluntary liquidation in March 2016 and investigations by the administrator uncovered more than 750 claims from creditors, who had not received their funds.
The Insolvency Service investigated further and established that the company received payments from clients totalling ?36.9million with ?2.7million returned to clients as refunds or withdrawals from their funds, whilst payments to the client?s creditors totalled ?17.4million.
Evidence showed a shortfall of ?1.6million in funds available to clients. However, in the absence of significant client documents, estimates are that the shortfall may be much higher. The liquidators received creditor claims totalling ?4.4million including ?4.2million from clients of the company.
The company also used funds to pay its own expenses, including ?3.3million to the benefit of the directors over the entire trading period.
And the company also mismanaged their funds. When the company first started until November 2012, funds and the client funds were held together before they were separated. However, between November 2012 and March 2016, the company failed to operate its segregated client account correctly and transferred any surplus client funds to its company expense account.
As a result of the investigation, Robert Solloway, Mark Harrison and Richard Mott gave disqualification undertakings which were accepted by the Secretary of State for Business, Energy & Industrial Strategy.
Robert Solloway is disqualified for 11 years and cannot be the director of a company until 2 April 2029, while both Richard Mott and James Harrison are disqualified for nine years each.
David Brooks, Chief Investigator, Investigation and Enforcement Services at the Insolvency Service, said:
Clients believed their debts were being managed and funds they provided to the company passed to creditors. The directors? lack of awareness in how they treated funds going through the company resulted in the losses suffered by clients, some of whom were in vulnerable situations.
These lengthy disqualifications indicate the seriousness of the lack of care the directors showed in running the company.
An uncle and nephew team who ran a kebab takeaway in Camden have been banned from holding directorships for 14 years for suppressing takings.
Following collaboration between the Insolvency Service and HMRC, Genc Ali Demir (53) and his nephew Mehmet Demir (26) have been disqualified from acting as company directors for seven years each after they suppresed takings and sales that had been omitted from submitted VAT returns.
The disqualifications relate to Mehmet Ali and his uncle?s management of Camden Kebab Ltd, which traded as kebab takeaway ?Real Taste? from 44 Camden High Street, North West London.
The Companies House register listed Mehmet Ali as the only registered director of Camden Kebab Ltd but investigations showed that his uncle played a key role in running the business.
An in-depth HMRC investigation revealed that the company had failed to record all of its takings and had therefore under-declared the VAT due to HMRC. As a result, HMRC raised a VAT assessment of ?71,474.
During May and June 2016, HMRC carried out further investigations which uncovered, among other things, that the company ran a cash-only business and that the books and records it ought to have kept were inadequate and/or unsatisfactory.
At liquidation on 21 April 2017, HMRC stated that the company owed in excess of ?297,000 for arrears of VAT, Corporation Tax and penalties.
HMRC issued Personal Liability Orders against both Genc Ali Demir and Mehmet Demir as their investigations led them to conclude both individuals ran the business despite officially it only being Mehmet Demir. Further investigations by the Insolvency Service following the company?s liquidation, confirmed the findings by HMRC.
As a result, Genc Ali Demir and Mehmet Demir gave disqualification undertakings which were accepted by the Secretary of State for Business, Energy & Industrial Strategy, on 5 and 9 April, respectively.
The disqualifications mean that both Genc Ali Demir and Mehmet Demir cannot be directors of a company whether directly or indirectly, or be involved in the management of a company in any way for the duration of their disqualifications ? from 26 April and 30 April respectively - unless they have permission from court.
Lawrence Zussman, Deputy Head of Investigations with the Insolvency Service, said:
These disqualifications send a clear message to other company directors that tax abuse of any kind, particularly when it comes to suppression of takings by directors, will not be tolerated.
Much of the public service is funded by the correct amount of taxes being paid. By not declaring and paying the correct amount of taxes, the public has been deprived from receiving the services it deserves from the public sector.
Further, whether you are a registered director or not if there is evidence that demonstrates you acted in the capacity of the management of a company the Insolvency Service will be proactive in taking action against you which could result in disqualification as is the case here.
The director of a car spare parts company has been disqualified for 7 years after he admitted transferring ?50,000 out of the company?s bank account. Ayaan Khan was the sole director of Salford Auto Spares Ltd (SAS), which was incorporated in 2011 ...
A multimedia boss from Taunton has been handed a suspended sentence after he fraudulently pocketed ?100,000 from his failing company to avoid paying his creditors.
Andrew Reed (53) was the director of APR Media, formerly known as APR Video, where he produced and duplicated recordable media since it was first incorporated in 1996.
However, when the company began to make a loss and after 16 years of trading, Andrew Reed instructed insolvency practitioners in October 2012 to place APR Media into creditors? voluntary liquidation with a total deficiency of just over ?800,000.
During the initial investigation into the company?s affairs, the insolvency practitioners could not account for around ?125,000 which had been transferred out of APR Media?s accounts just a couple of months before it was placed into liquidation.
Further enquiries by the Insolvency Service found that Andrew Reed fraudulently transferred money out of APR Media in the full knowledge that the business was insolvent in order to avoid paying his creditors.
In August 2012, Andrew Reed paid himself a ?100,000 dividend and in September 2012, he transferred ?25,250 to M5 Audio & Events, a company where his wife was a director.
Andrew Reed pleaded guilty to two fraud charges and on 27 April 2018 he was sentenced to 15 months in prison, suspended for two years, while also being ordered to complete 120 hours of unpaid work and pay ?7,500 in costs.
The sentence was handed down despite the fact that Andrew Reed had paid back over ?200,000 to the estate once the wrongful payments had been identified by the insolvency practitioner.
Glenn Wicks, Deputy Chief Investigation Officer of the Insolvency Service, said:
Andrew Reed knew his company was failing and unscrupulously ripped off his creditors by transferring money to his other company. The court has shown anyone doing this stands a serious chance of going to prison.
Boss of a specialist recruitment agency is banned from running companies after diverting ?60k from an insurance settlement into his personal bank account.
Dean Jacobs, 29 of Birmingham, was the sole director of L & H Construction Limited, a specialist recruitment company helping people in the mechanical and electrical industries find new work.
But after trading for a little over two and a half years, the business ran into difficulties and L & H Construction entered into administration on 4 January 2017 after HMRC presented a winding up petition for an outstanding tax bill. Upon administration, L & H Construction owed creditors close to ?800,000.
Insolvency practitioners were brought in to deal with the administration but Dean Jacobs failed to cooperate with their investigations.
Administrators were then made aware that L & H Construction was awarded an insurance settlement and when asked where the money had gone, Dean Jacobs could not provide any explanation of what he did with the funds.
Further investigations by the Insolvency Service found that despite being fully aware that L & H Construction had stopped trading and owed money to creditors, Dean Jacobs diverted ?60,000 from an insurance settlement straight into his personal bank account.
As a result, on 16 April 2018 the Secretary of State accepted a disqualification undertaking from Dean Jacobs. The ban became effective from 7 May 2018 and he is now banned from directly or indirectly becoming involved, without the permission of the court, in the promotion, formation or management of a company for 10 years.
Susan MacLeod, Chief Investigator of Insolvent Investigations, Midlands & West at the Insolvency Service, said:
Dean Jacobs put his own interests ahead of the company?s creditors and the timing of the funds he took from the insurance settlement showed a cynical disregard to those creditors.
Directors who put their own personal financial interest above those of creditors damage business confidence. We will take action against directors who do not take their duties seriously and abuse their position and they will therefore lose the privilege of limited liability trading.