INTENTION TO COMMENCE PROCEEDINGS TO DISQUALIFY ME

Discussion in 'Insolvency' started by Seb78, Feb 25, 2020.

  1. Seb78

    Seb78 UKBF Newcomer Free Member

    13 0
    I wanted to post this thread as I found out yesterday that the Insolvency Service are seeking to get me banned from being a director for up to 4 years and 3.5 years if I don't fight it.

    I took over an existing restaurant business in 2017 using a brand new company. The restaurant was failing under the previous owners and I managed to take it from a £5k a week business into a £10k a week business in a matter of a few months.

    The casual deal I had arranged with the owners of the brand was that I would pay them £1000 per week to operate the restaurant. When the owners saw how much I was making they demanded that it be increased to £1300 per week which I agreed to.

    I managed to make the first £20k VAT payment and £5k PAYE payment but quickly realized that if I did not make the weekly payments to the owner of the brand that I would be removed from the site with 30 days notice.

    I had an employee that was found to have stolen as much as £7k which was all documented with the Police and he was charged and convicted.

    We also had a weeks worth of flooding damage done to the restaurant.

    Long story short I did not manage to make any other payments to HMRC and after having failed to raise capital through high net worth investors which I hoped would allow me to trade through I placed the company into voluntary liquidation in Jan 2019.

    I have informed the Insolvency Service about all of this already and I am now being pursued and wish to disqualify me for up to FOUR years.

    I never took a salary during the time I ran the business and lived off my savings. I was left with a business overdraft debt to the bank for £25k which I had personally guaranteed.

    The restaurant was taken back by the previous owners who now have benefited from the changes that I made. Now I have no money to defend myself. Please can I ask the experienced members of this forum your advice on what I should do next:

    1. It seems detrimental to my future to just accept it without a fight. The Insolvency Service have only offered me 6 months less in any case to hold my hands up to something I don't believe to be true. Can or should I act as a litigant in person if I have no other choice?

    2. Should I try and find the money to pay a direct access barrister to defend me?

    3. What should I do with my other two companies that still exist?

    4. I have been told that there are only 1000 bans per year and that I am clearly just very unlucky as the term they are seeking me to be banned for his only 4 years - almost the lowest. Is it possible that the IS will give up if they know that I intend to vigorously defend myself?

    5. If I go to court and lose with they seek to recover costs from me?

    6. Does the disqualification stay on my record forever?

    7. Does it affect my personal credit score and my ability to get loans?

    8. Other than Companies House where are the records made public?

    9. There were hardly any other creditors owed money but it seems that if I had not paid someone other than HMRC then I would not be being pursued. Do you think this is true?

    Please let me know any advice you think would be helpful to me in defending myself. Thank you!
     
    Posted: Feb 25, 2020 By: Seb78 Member since: Feb 25, 2020
    #1
  2. Mark T Jones

    Mark T Jones UKBF Big Shot Free Member

    4,522 1,646
    Presumably there are some specifics around why they intend to ban you?

    simply having a failed business is unlikely to be the reson
     
    Posted: Feb 25, 2020 By: Mark T Jones Member since: Nov 4, 2015
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  3. Mr D

    Mr D UKBF Legend Free Member

    22,065 2,593
    If you are banned from being a director for a period of time then you could not be a director of your other 2 businesses.
    You would need someone else to be a director of them or convert them to sole trader and carry on running them.
     
    Posted: Feb 25, 2020 By: Mr D Member since: Feb 12, 2017
    #3
  4. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    11,477 2,366
    This may well be a standard letter to scare you from HMRC, sometimes it's in how you read a letter, to one person its a threat, to another its just a warning of what action they could take if found guilty of deliberate misconduct

    Far better to talk to them and get the whole story, or ask your accountant to get in touch with them
     
    Posted: Feb 25, 2020 By: Chris Ashdown Member since: Dec 7, 2003
    #4
  5. MikmakFer

    MikmakFer UKBF Contributor Free Member

    38 7
    Can you let us know what section of the insolvency act they're using to go for you? That would be the best starting point.
     
    Posted: Feb 25, 2020 By: MikmakFer Member since: Feb 11, 2020
    #5
  6. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    3,486 436
    What misconduct has been alleged to consider the disqualification?

    Has there been any mention of a fine?

    Are the Liquidators pursuing you for any misconduct?
     
    Posted: Feb 25, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #6
  7. Seb78

    Seb78 UKBF Newcomer Free Member

    13 0
    Section 16 of the Company Directors Disqualification Act 1986.
     
    Posted: Feb 25, 2020 By: Seb78 Member since: Feb 25, 2020
    #7
  8. MikmakFer

    MikmakFer UKBF Contributor Free Member

    38 7
    So I think that if you're looking for opinions (not advice - we're not lawyers) then you need to give us a bit more info.

    What is the specific reason that they're trying to disqualify you? Is it wrongful trading, fraudulent trading, undervaluation etc. etc.

    This is super important because that is what your defence would be based on.
     
    Posted: Feb 25, 2020 By: MikmakFer Member since: Feb 11, 2020
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  9. Seb78

    Seb78 UKBF Newcomer Free Member

    13 0
    Hi Lisa,

    1. They allege that I received over £450k and only paid them £20k in VAT when if the business was actually profitable I should have paid them another £76k.

    2. They are not currently pursuing me for a fine.

    3. The liquidators are not pursuing me for any misconduct.

    I look forward to reading your thoughts.

    Best wishes

    Seb
     
    Posted: Feb 25, 2020 By: Seb78 Member since: Feb 25, 2020
    #9
  10. Seb78

    Seb78 UKBF Newcomer Free Member

    13 0
    Specifically that I didn't pay HMRC to their detriment.
     
    Posted: Feb 25, 2020 By: Seb78 Member since: Feb 25, 2020
    #10
  11. Seb78

    Seb78 UKBF Newcomer Free Member

    13 0
    I really hope it is just a letter to scare me but i think they will take it all the way sadly.
     
    Posted: Feb 25, 2020 By: Seb78 Member since: Feb 25, 2020
    #11
  12. Mr D

    Mr D UKBF Legend Free Member

    22,065 2,593
    Eh?
    VAT does not depend on business being profitable.
     
    Posted: Feb 25, 2020 By: Mr D Member since: Feb 12, 2017
    #12
  13. Seb78

    Seb78 UKBF Newcomer Free Member

    13 0
    I think my big mistake was that I should have closed the company much sooner than I did but I was speaking with investors to come in and rescue the business which never materialized. If I was to be disqualified then should I resign as director of my two other companies first or wait to see what happens?
     
    Posted: Feb 25, 2020 By: Seb78 Member since: Feb 25, 2020
    #13
  14. consultant

    consultant Your Business Community Staff Member

    5,575 774
    What does your accountant say about HMRC's claims?
     
    Posted: Feb 25, 2020 By: consultant Member since: Jan 21, 2008
    #14
  15. Seb78

    Seb78 UKBF Newcomer Free Member

    13 0
    The accountant that I was using at the time on this business has gone into retirement and seems to be unreachable. It also possible they were owed a months worth of fees.
     
    Posted: Feb 25, 2020 By: Seb78 Member since: Feb 25, 2020
    #15
  16. MikmakFer

    MikmakFer UKBF Contributor Free Member

    38 7
    Was the VAT an accounting error or a non payment issue?

    Fundamentally speaking, if it's a non payment issue then they're going from a wrongful trading perspective.

    In wrongful trading, it's your responsibility to ensure that you take reasonable steps to minimise creditor losses where there is no prospect that the Company can continue in the future. This is mainly a cashflow test (you could have a loss making business that could pass the cashflow test, They would however need to understand how they're going to get out of the mess)

    From what you've said you have 1) recognised that the Company cannot continue trading profitably and 2) you've tried to secure financing which ultimately failed.

    I think the only route you can go down in that instance is how hard did you seek finance and did you call in the practitioners as soon as it was clear this was not going to happen - this is your main defence, if you were in the wrong here then you've breached your fiduciary duty and you then need to fall back on skill level. You need to show that a person of your skill would not have been able to understand this and the intrinsic rules.

    This is all opinion of course and I'd suggest you need to lawyer up if you want to avoid disqualification as they'll be able to present a case....

    Good luck and let us know how you get on....
     
    Posted: Feb 25, 2020 By: MikmakFer Member since: Feb 11, 2020
    #16
  17. Chris Ashdown

    Chris Ashdown UKBF Legend Free Member

    11,477 2,366
    So simply put how many months did you continue to trade without paying vat, but i Guess at the same time paying the restaurant owner the £1300 per week and your post seems to indicate you told HMRC this
    If this is correct then one way they may look at it is, you paid one creditor in preference to HMRC and used the amount of vat you had collected from customers to pay the landlord a deliberate act
     
    Posted: Feb 25, 2020 By: Chris Ashdown Member since: Dec 7, 2003
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  18. Seb78

    Seb78 UKBF Newcomer Free Member

    13 0

    Thanks for this advice. Yes this was my first business and I certainly believed that I could trade out of this. If it had not been for the £1300 per week payment on top of the rent then I certainly would not have had this problem. If i had managed to find an investor to open more stores, I could have paid back the revenue without any problem. I will investigate if I can afford a solicitor but I suspect it will cost a lot of money. Do you think I should act as a litigant in person if they are unaffordable?
     
    Posted: Feb 27, 2020 By: Seb78 Member since: Feb 25, 2020
    #18
  19. Seb78

    Seb78 UKBF Newcomer Free Member

    13 0
    I think it was about 12 months. HMRC were not chasing me every day like the owner was. I have certainly learned my lesson but feel it is unfair that I should be banned as a director for this.
     
    Posted: Feb 27, 2020 By: Seb78 Member since: Feb 25, 2020
    #19
  20. Lisa Thomas

    Lisa Thomas UKBF Enthusiast Free Member

    3,486 436
    I have to recommend you take legal advice but suspect this might not be worth fighting and might be easier to accept the voluntary disqualification.

    There must have been some material misconduct for the Insolvency Service to consider disqualification as they only look to disqualify a small % of cases.
     
    Posted: Feb 27, 2020 By: Lisa Thomas Member since: Apr 20, 2015
    #20