Experts in
Director
Disqualification

Experts in
Insolvency &
Restructuring

Experts in
Insolvency Claims
& Litigation

Experts in
Commercial
Litigation

Experts in
Regulatory
Disputes

Experts in
Construction
Disputes

Distinction for Insolvency Solicitor To Be

Distinction for Insolvency Solicitor To Be

Congratulations Richard Shepherd – Distinction in the Legal Practice Course. He’s One of Our Own!

We’re delighted to report that one of our paralegals, Richard Shepherd, has achieved a distinction in his Legal Practice Course, on his journey to becoming a fully-fledged Insolvency Solicitor. Neil Davies, partner and director of NDP, said:

“Congratulations Richard on passing your Legal Practice exams, en route to your becoming an insolvency solicitor – and with distinctions too, as I understand it. Well done you.”

(Neil, being a life-long Villa fan, also punched the air, and sang ‘he’s one of our own…….’, as football fans do when a young player makes it through to the first team from the Academy!!)

A little bit about Richard Shepherd

Richard graduated with a law degree in July 2016, and joined us in November 2016 as a paralegal, having already become interested in company law and insolvency law as his areas of focus, in particular director disqualification and related insolvency matters. Click here to find out more about Richard.

This suited us fine because we are a firm of specialist insolvency solicitors, and we are delighted with this superb result in his exams. The only danger is that he might decide to follow his dream and get on stage as a guitarist with his band, with the Pyramid stage at Glastonbury the ultimate goal. Should that happen, we’ll be right there at the front cheering him on!!

The Legal Practice Course

The Legal Practice Course is the final vocational stage to becoming a solicitor in England and Wales. Everyone who wants to be a solicitor has to pass it.

The full-time course lasts 9 months – 1 year, which is what Richard did, effectively taking a sabbatical from NDP. Typically, pass rates vary between 75% and 85%. It is estimated that only c. 10% get a distinction. In a typical year, over 8,000 sit the exam, so Richard is in the top 800 or so in the country. That’s pretty impressive.

We’re delighted to have Richard back on the team, and look forward to him becoming an insolvency solicitor

In the meantime, if you have an insolvency related problem, please contact us or call us on 0121 200 7040. The first discussion is FREE.

Alcohol Wholesalers now need to be Registered. What Regulatory Disputes and Problems will this cause? How to deal with HMRC.

Alcohol traders dealing in wholesale now need to be registered with HM Revenue & Customs. This transformation of the wholesale alcohol industry is brought about by the need to combat inward diversion fraud costing the public purse up to £1.5 billion annually.

HMRC are now implementing the Alcohol Wholesalers Registration Scheme (“AWRS”) from April 2017, and the feedback from traders is that of severe disruption and uncertainty within the market place.

All existing alcohol traders must have applied for approval by 31 December 2015.  All businesses intending to trade within the wholesale alcohol market must obtain approval before making any wholesale supplies. Failure to do so may result in the implementation of significant penalties and you may be deemed to be trading without approval.

This article looks at the regulatory disputes and problems that can arise from failure to comply with the new rules and regulations and what trade buyers need to do when dealing with HMRC.

Regulatory Problems and Disputes

Alcohol Wholesalers Registration Scheme

The Regulatory Problem with Alcohol Wholesalers

The Exchequer loses up to £1.5bn annually to inward diversion fraud.  This is essentially the release onto the UK domestic market of duty-unpaid alcohol products.  This fraud is widespread and highly organised often involving multiple parts of the supply chain.

The difference between duty-paid and duty-unpaid products can be significant.  The release of duty-unpaid alcohol products presents a significant price advantage to the fraudster and the illicit profits to be made are large.

This trade erodes tax revenues and puts law abiding traders at a huge disadvantage in the market place. It is for this reason that AWRS is being implemented to address this regulatory problem.

The New Law: Alcohol Wholesaler Registration Scheme (‘the scheme’)

The new law is to be implemented by way of a change to the Alcoholic Liquor Duties Act 1979 (‘ALDA’).  Section 6A of that Act is to be amended to usher in the new regime.  Further, the Wholesaling of Controlled Liquor Regulations 2015 will come into force in April 2017.

Those Regulations contain the detail of the approval and registration requirements that are at the heart of the new regime.

The Scheme will regulate the ‘wholesaling of controlled liquor’ and other ‘controlled activities’.  In practical terms this means:

  1. Selling ‘controlled liquor’ wholesale
  2. Offering or exposing controlled liquor for wholesale
  3. Arranging in the course of a trade or business for controlled liquor to be sold wholesale

It is important to note that there are no de minimis limits.  Therefore, all business to business vendors of duty-paid alcohol will have to be authorised and registered pursuant to the Scheme.  The new regime is not intended to capture sales from retailers to the public.  The legislation also provides an ‘incidental sale’ defence for those retailers that have made a wholesale sale without the requisite knowledge or intention.

The Application process follows the ‘fit and proper’ test and can be made via the HMRC website.

It is thought that up to 20,000 businesses will be affected by this change in the law with severe penalties for breaches.

New Criminal Offence: Trade Buyers

When the Scheme comes into force in April 2017 it will be a criminal offence for a ‘Trade Buyer’ to purchase duty-paid alcohol from unapproved wholesalers.

A ‘Trade Buyer’ is ‘someone who purchases alcohol from a wholesaler to either sell on to trade, or to sell to private individuals, i.e. a retailer’.

The penalties for this breach will be custodial sentences, fines, seizure of goods and potential removals of licence.

What to do to avoid Regulatory Disputes and Problems

The most obvious point to make is that enhanced due diligence and record keeping will be necessary.  Traders must be absolutely sure who they are dealing with and what their status is.

HMRC have produced Excise Notice 2002 as a practical guide to the scheme.

In the event that an application for approval is rejected, or conditions are attached to any such approval or that penalties are applied, then Traders will have a right to appeal to the First Tier Tax Tribunal.

The immediate practical problem for traders is that if an application for registration is refused a trader will have to cease making wholesale supplies immediately.  A trading business is effectively dead during the period of time it takes for the Tax Tribunal to determine the matter.

It is therefore imperative that advice is sought through the registration application process to ensure that HMRC comply with their obligations.  Where HMRC’s decision making processes are defective, Judicial Review proceedings may be available with interim measures such as injunctions to enable to the trader to continue to stay in business pending the determination of the matter by the Tax Tribunal.

If you are a trade buyer and you are encountering difficulties understanding or complying with the new rules and regulations, contact us or call us on 0121 200 7040. Our regulatory compliance solicitors will be happy to discuss and advise on your regulatory problems, and the initial conversation is free.

Insolvency Solicitors and Equity of Exoneration

Insolvency Solicitors and Equity of Exoneration

A Recent Court Decision – Our Insolvency Solicitors Comment on its Impact on Claims Brought by Trustees in Bankruptcy

This article by our insolvency solicitors looks at a recent Court of Appeal Decision and its impact on claims brought by Trustees in Bankruptcy. The decision, made in the case of Williams v Onyearu ([2017] EWCA Civ 268), provides a new insight for both bankrupts and Trustees in bankruptcy as to the factors the court will consider when considering Equity of Exoneration arguments.

The Law of Equity of Exoneration – An Overview

The principle of Equity of Exoneration applies where, prior to the making of the bankruptcy order, the bankrupt charges a jointly owned asset for their own personal benefit and advantage. This most commonly occurs when dealing with the family/matrimonial home.

For Example:

Mr and Mrs Smith jointly own their matrimonial home which has equity of £100,000. Mr Smith then takes out a second mortgage on the property for the sum of £50,000 to pay for his personal debts.

Unfortunately, Mr Smith incurs further debts and is made bankrupt meaning that his 50% share in the matrimonial home vest in his Trustee. The Trustee in Bankruptcy would therefore be entitled and required to realise Mr Smith’s notional 50% interest in the property in the sum of £50,000 for the benefit of the creditors.

However, Mrs Smith may argue that her husband has already taken his 50% share out of the property by virtue of the earlier £50,000 remortgage and that she is therefore entitled to 100% of the equity.

The above is a commonly used defence to possession and sale applications, brought by Trustees in Bankruptcy in respect of matrimonial property. Until Williams v Onyearu, there has been little judicial guidance from the higher courts.

The Factors the Courts Have Traditionally Looked at

The courts, faced with such arguments, have traditionally looked at the following factors when considering Equity of Exoneration arguments:

  • Whether husband and wife were financially independent from one another (e.g. whether they operated separate bank accounts);
  • Whether the non-bankrupt spouse has been exclusively maintaining the mortgage and other household expenses;
  • Whether the non-bankrupt spouse indirectly benefited from the bankrupt’s further borrowing (e.g. did the bankrupt invest the money into a business which improved the spouse’s lifestyle).

If (for example) the court decides that the bankrupt has had the exclusive benefit of the further borrowing then the general rule is that the bankrupt’s borrowing will be taken from their share of the equity in the property, with the following consequences:

  1. The Trustee in Bankruptcy will only be entitled to receive a much-reduced sum representing his interest in the property;
  2. The Bankrupt and his family will have to raise the lesser sum to buy out the Trustee’s interest in the property than would otherwise be the case.

The Finding in Williams v Onyearu

Williams v Onyearu was an appeal by Mr Onyearu’s trustee in bankruptcy from a High Court decision which held that the Equity of Exoneration applied in favour of Mrs Onyearu even though she had received an indirect benefit from her husband’s borrowing.

In his Judgement, Richards LJ made several remarks which are useful to understanding the operation of the Equity of Exoneration, as summarised below:

  1. Richards LJ clarified that the principle of Equity of Exoneration is not limited to cohabiting couples. It can arise in any case where there is jointly owned property and one party borrows against the whole of the equity.
  2. Where the conditions at (1.) above are met, it is to be inferred that Equity of Exoneration applies, unless rebutted by evidence.
  3. Equity of Exoneration can apply even where the non-bankrupt spouse has received an indirect benefit, although this may not be the case if the couple’s finances were intertwined.

Our Insolvency Solicitors Summarise

This finding appears to favour a non-bankrupt spouse who is seeking to safeguard the family home as it provides greater scope to argue that that Equity of Exoneration should apply. However, the finding will likely prove frustrating for Trustees as it may result in a greater number of possession and sale applications being defended.

Dealing with, and Defenses to, Possession Claims brought by Trustees in Bankruptcy

Quite separate from ‘equity of exoneration’ arguments there are a number of other tools available to the Bankrupt to reduce or eliminate the extent of the Trustee in bankruptcy’s Claims.

Our Insolvency Solicitors are well-used to dealing with such claims on behalf of both Trustees and the Bankrupt/His Family.  Contact us or call us on 0121 200 7040 for help and advice in this area. The initial discussion is FREE.

 

Company Director Disqualification and Accounting Records

Company Director Disqualification and Accounting Records

13 Year Director Disqualification for Failing to Keep Proper Accounting Records

The Company Directors Disqualification Act 1986 details the list of reasons for director disqualification – and there are many. One of the categories is disqualification for ‘unfitness of conduct’, and one of the main determinants of unfitness is not keeping proper accounting records. In this article, our director disqualification solicitors comment on a recent case where a director was disqualified for 13 years (close to the maximum of 15 years) for being unable to explain over £2.4 million of trading activities, VAT assessments and loans.

The Background to this Director Disqualification Case

 Mr Zaid Fares Al-Safee was a registered Director of Exotic Global Limited (‘the Company’) which sold luxury new cars. The Company was incorporated in 2013. in June 2015, following nearly 2 years of trading, Exotic Global was placed into Creditors’ Voluntary Liquidation (‘CVL’) and an Insolvency Practitioner was appointed to the Company.

Mr Safee failed to deliver-up the Company’s accounting records to the appointed Insolvency Practitioner and this led to a report being submitted to the Secretary of State for Business, Energy and Industrial Strategy by the Liquidator, which highlighted his lack of co-operation.

This prompted the Insolvency Service to carry out an in-depth investigation into the financial affairs of Exotic Global. However, the absence of any proper accounting records meant that they were not able to verify who had control of the company’s affairs.

The Missing Information and Unexplained Trading Activities

The information that was missing from the company’s records of its income and expenditure, included Mr Safee’s remuneration, the acquisition (or subsequent disposal) of Company assets and the full nature of the Company’s trading activities. The trading activities that were unexplained included:

  • The purchase and sale of 14 luxury vehicles valued in excess of £1.2 million,
  • VAT assessments totalling £498,106.80,
  • The background of a £318,000 loan,
  • The purchase and sale of 45 vehicles totalling £354,553,
  • Two personalised number plates totalling £40,023.

After a 2-day trial in the High Court, Mr Safee was disqualified as a director for 13 years on 14th March 2018, banning him from directly or indirectly becoming involved in the promotion, formation or management of a company without the permission of the Court.

The Relevant Provision in the Companies Act

Mr Safee had failed to comply with his duty as a director under Section 386 of the Companies Act 2006. This requires:

Every company [to] keep adequate accounting records. Adequate accounting records means records that are sufficient: (a) to show and explain the company’s transactions; (b) to disclose with reasonable accuracy, at any time, the financial position of the company at that time; and (c) to enable the directors to ensure that any accounts required to be prepared comply with the requirements of this Act.”

What the Insolvency Service Said

Ken Beasley, Official Receiver at the Insolvency Service, said:

“Maintaining and keeping adequate accounting records is a legal requirement for all companies. Failure to do so is serious misconduct and the length of Mr Zaid Fares Al-Safee’s disqualification reflects this.”

Comment by our Director Disqualification Solicitors

Had Mr Safee caused or ensured that the Company complied with its duty under Section 386, the Insolvency Service would have been able to complete their investigations and Mr Safee might have been able to adequately deal with the concerns raised by the Insolvency Service. This case is a stark reminder to company Directors of their duties under the Companies Act and the action the Insolvency Service will take for a failure to comply with them.

The length of the Director Disqualification given out in this case, shows the seriousness with which the Insolvency Service views this books and records breach of duty by the Director. 13 years is a very long ban.

A Criminal Investigation Could Follow

The Insolvency Service when accepting a Director Disqualification Undertaking make it quite clear that a Criminal investigation could ensue, based upon the admitted conduct complained of. The Insolvency Service has a specialist team of dedicated Criminal Investigators. The prospect of a Criminal investigation is thus a very real one.

Director Disqualification Compensation Proceedings

The Secretary of State has powers, quite separate from the recovery powers available to the Liquidator, to seek compensatory payments from the Director personally. So the disqualification handed out to Mr Safee might not be the end of the matter.

Director Disqualification Solicitors

For help and advice on defending yourself if threatened with Director Disqualification, talk to our Director Disqualification Solicitors: contact us or call us on 0121 200 7040. The earlier you make contact, the more we can do to help. Click here to see some of our director disqualification testimonials.

This website uses cookies to give you the best user experience. For information on cookies please read our cookie policy. Click on the Accept button to continue using Cookies on this website.  By declining cookies you might lose some functionality.