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Director Disqualification for Pension Scammers

Director Disqualification for Pension Scammers

Pension Bosses Banned for 34 Years for £57 Million Pension Scam – Our Director Disqualification Solicitors Comment

Misleading the public is never an allegation that is going to end well for the delinquent Director. This case (essentially a pension scam), which resulted in a total of 34 years of director disqualification between 4 directors, following the transfer of million-pound pension funds and an Insolvency Service investigation, demonstrates the point.

Background to this Director Disqualification Case

Mr Karl Dunlop (‘Mr Dunlop’), Mr Stuart Grehan (‘Mr Grehan’) and Mr Ian Dunsford (‘Mr Dunsford’) had previously accepted Director Disqualification Undertakings for their management roles within the group of companies involved in the transfer of funds.

Mr Dunlop, the Director of Imperial Trustee Services Ltd (‘Imperial’), accepted a 9-year Director Disqualification Undertaking for failing to act in the best interests of pension members and subsequently failing to ensure investments were adequately diverse.

Mr Grehan, Director of Sycamore Crown Ltd (‘Sycamore’) and, agreed to a 9-year ban as a result of false and misleading statements made to encourage investors to transfer their pension pots.

Mr Dunsford, Director of Omni Trustees Ltd (‘Omni’), agreed to a voluntary ban for 7 years for failing to act in the best interests of pension members and subsequently failing to ensure investments were adequately diverse.

Mr Stephen Talbot was not formally appointed a Director of Transeuro Worldwide Holdings Ltd (‘Transeuro’) but accepted a 9-year Director Disqualification Undertaking for failing to explain what happened to millions of pounds worth of assets.

The Insolvency Service’s Investigation

The investigation centred on the conduct of the Directors connected with Transeuro, who helped fund 2 introducer firms – Sycamore and Jackson Francis Ltd (‘Jackson’).

The introducer firms cold-called members of the public, inviting them to transfer their pension pots into Self Invested Personal Pension plans (‘SIPPs’) and pension schemes operated by Omni and Imperial, who provided Trustee and Administrator services for 2 occupational pension schemes – Henley Retirement Benefit Scheme (HRBS) and Capita Oak Pension Scheme (‘COPS’).

The Directors Misled the Investors

Insolvency Service Investigators found that the introducers from both Sycamore and Jackson misled clients about their expertise and experience, offering ‘guaranteed’ returns designed to encourage them to transfer their existing pension funds.

As a result, more than £39,000,000.00 was paid into SIPPs, over £10,000,000.00 into COPS and more than £8,000,000.00 to HRBS. Members’ funds were then largely invested in unregulated investments in storage units which ultimately did not yield the level of returns promised to members.

The Insolvency Service’s Comment

Mr Ken Beasley, Official Receiver for the Insolvency Service’s Public Interest Unit, said that unfortunately he has seen an increase in cases where members of the public have been persuaded to transfer their hard earned pension pots into new schemes on the basis of unsubstantiated promises of higher returns which inevitably never materialise.

Our Director Disqualification Solicitors Comment

The length of the Director Disqualifications given out in this case, shows the seriousness with which the Insolvency Service views such conduct. Such scams have become all too common following the introduction of ‘Pension Freedoms’ in April 2015. Misleading investors is never an attractive picture.

Collateral or parallel criminal law or compensatory proceedings may follow against the Directors.

The team of director disqualification solicitors at NDP are experienced in dealing with such claims. Click here to see some of our testimonials. For help and advice on defending yourself if threatened with disqualification, talk to our Director Disqualification Specialists by calling us on 0121 200 7040, or contacting us. The earlier you earlier you get in touch, the more we can do to help.

Insolvency Solicitors and Advising Directors

Insolvency Solicitors and Advising Directors

Adding Value. Who Advises the Director, leading up to Formal Insolvency? Eyes Wide Shut!

The position of the Director is all too often overlooked or comes a poor second to that of the company, when insolvency looms. You wouldn’t take an exam without first preparing properly. Why then would the Director liquidate his company without first checking his/her own personal position? In this article, our insolvency solicitors look at the threats that directors face at insolvency and who advises the director at this crucial time.

The Insolvency Practitioner’s Responsibilities are not Towards the Director

Let’s immediately dispel the myth that the Insolvency Practitioner who is brought in to advise the company, has any obligations or duties to the Director. The Insolvency Practitioner’s role is to look after the company and its creditors, not the Director.

Experience tells us that to overlook the position of the Director at this crucial time before formal insolvency is a recipe for impending disaster for the Director, who may as a consequence face misfeasance claims post administration/liquidation from, amongst others:

  1. The Liquidator/Administrator, seeking financial recompense from the Director personally, for:
  • Illegal Dividends.
  • Mis-use of company assets or company property.
  • Overdrawn Directors Loan Account (‘DLA’).
  • Repayment of sums paid to third parties in the period up to formal insolvency.
  1. The Insolvency Service, who will investigate the conduct of the Director with the possibility (if ‘Unfit Conduct’ is suspected) that they will seek the disqualification of the Director or a Director Disqualification Compensation Order.
  2. Company creditors, pursuant to Personal Guarantees given by the Director in better financial times, to support the company’s position. These are most commonly given by the Director to suppliers, bankers, finance houses, landlords and others.
  3. The Department for Business, Innovation and Skills, or other Criminal Law Investigators, arising from the Director, for example:
  • Failing to maintain/preserve/deliver up company books and records.
  • Allowing the company to become involved (often unwittingly) in MTIC Fraud.
  • Breaching an existing Director Disqualification Order/Undertaking and/or aiding and abetting such breaches (NDP is currently instructed on 4 such cases).
  • Committing fraud in anticipation of company winding up (section 206 of the Insolvency Act 1986 (‘the IA 1986’)). This includes:
    • Concealing the company’s property or concealing debts due to or from the company.
    • Fraudulently removing the company’s property.
    • Pawning, pledging or disposing of company property obtained on credit that has not been paid for.
  • Committing transactions in fraud of creditors (section 207 of the IA 1986) to include:
    • Causing or making a gift or transfer from company property.
    • Concealing or removing any part of the company’s property.
  • Committing misconduct in the course of winding-up (section 208 of the IA 1986)

Fear not however! Our Insolvency Solicitors can Help. There are Statutory and Common Law defences that can be deployed and used by the well-advised Director in answer to many of the above offences.  The key is to deploy and use the Defences to the Director’s best advantage.

So What Should the Well Advised Director Do?

Whether the company is facing administration, a Compulsory Winding-Up Petition or contemplating the appointment of a voluntary liquidator, there is much that can and should be done by the Director before formal insolvency.

Surely the Proposed Liquidator/Administrator Will Look After the Director

In reality, no.  The duties and obligations of the future liquidator/administrator are to the company and its creditors, not to the Directors.  The Director who sleep walks his/her company into formal insolvency will likely face personal claims.

What are the Director’s Objectives?

Whether the objective is to re-start the business of the failed company, mitigate guarantee liabilities or simply to effect an orderly wind down, the time before liquidation must be used by the Director to best advantage.  That may include the Director taking advice from insolvency solicitors and other specialists in relation to:

  • Property issues 

For example, negotiating with landlords to agree the terms of future property occupation (if required) or perhaps existing guarantee obligations.

  • Funding

Negotiating with finance companies and key creditors as to pre-liquidation liabilities and future trading terms (and possibly with new bankers or asset-based lenders (‘ABL’s’)).

  • Directors loan accounts (DLAs)

Addressing the position in relation to overdrawn DLA’s is a pre-liquidation must for the Director.  Are the numbers accurate?  Can/should those numbers be re-allocated?

  • Dividends

Is the Director going to come under attack from the Liquidator because there are insufficient reserves to justify dividends drawn? It is important to address and try and resolve such matters as soon as possible.

  • Professional advice

Does the company and the Director need new/better professional accountancy or legal assistance?   If so, get that help on board now, not only to address future trading issues but also to assist in addressing potential problems arising from OldCo.  The Director must always be aware of the potential for existing company advisers to get very defensive, at and around the time of insolvency.

  • Trading vehicle

New incorporation/trading documents, if NewCo is required, whether to acquire the business or assets of OldCo or otherwise.   What is the best trading style? Limited Company or LLP or sole trader?

The Statement of Affairs and the Director Questionnaire

The former will be required to be signed off by a Director of the company as part of the process that sees the company placed into formal insolvency.  It will be prepared by the Insolvency Practitioner but will be signed off by a Director, supported by a Statement of Truth, from the Director, as to the accuracy of the document.

The well-advised Director will always run that Statement of Affairs past an Insolvency Solicitor before signing it. The content of that document (like the Director’s Questionnaire, to be completed by the Director post insolvency) often come back to haunt Directors.  It is important to ensure they are completed correctly and accurately.

Insolvency Solicitors – NDP’s Role

Our Insolvency Solicitors can and do regularly assist Directors with all of the above issues and many more besides.  Over and above our involvement in legal issues, we have excellent and trusted contacts in the banking, ABL, accounting and Insolvency Practitioner markets. The involvement of the correct and appropriate professionals, from those sectors, is often crucial in achieving the best possible outcomes. Click here to see some of our testimonials.

If you are the director of a company threatened with insolvency, it is well worth taking advice from experienced insolvency solicitors such as those here at NDP. It could save you a lot in the long run, so please contact us or call us on 0121 200 7040. Our Insolvency Solicitors will be happy to discuss and advise on your problems, and the initial conversation is free.

Director Disqualification Predictions

Director Disqualification Predictions

Directors Under Continued Attack? Likely Future Trends in Director Disqualification

In a previous article we looked at 8 key current trends which our Director Disqualification Solicitors have noticed over the last 12 months. In this article, looking deep into our crystal ball, we predict what we think might happen during the next 12 months in the world of director disqualification.

First, a Recap of the 8 Current Trends in Director Disqualification

We have identified (and discuss below) the following current 8 trends:

  • CURRENT TREND 1 – New types of (allegedly) unfit conduct being investigated and pursued by the Insolvency Service (‘IS’) against Directors.
  • CURRENT TREND 2 – IS investigating and pursuing Criminal law offences via the Director Disqualification route.
  • CURRENT TREND 3IS pursuing Director Disqualification cases against Directors where the company is not even in a formal insolvency.
  • CURRENT TREND 4 – Admissions made by Directors in (Civil) Director Disqualification proceedings coming back to haunt Directors in Criminal proceedings.
  • CURRENT TREND 5 IS investigating and pursuing allegations of unfit conduct relying upon unproven and disputed matters of fact.
  • CURRENT TREND 6 – ‘What, no draft evidence?’
  • CURRENT TREND 7 – Internal procedures within the IS – potential for actual conflict of interest.
  • CURRENT TREND 8 – Breaches of Disqualification Orders and undertakings: ‘Go straight to jail’.

What Lies Ahead in Director Disqualification for 2019 and Beyond? Our Predictions

As specialists in Director Disqualification, these are some of the things that we think are bubbling under.

  • FUTURE TREND 1 – Director Disqualification Compensation Cases

The Law has changed to allow for cases, where financial compensation is sought from the Director, in addition to his/her Disqualification.  As yet, we have not seen a single such case brought by the IS.  We anticipate however that we will see such cases during 2019.  The Section 16 Letter currently tells the Director whether or not Compensation proceedings are anticipated.  The answer so far has been ‘No’.  We expect however to see such cases pursued in the coming months.

  • FUTURE TREND 2 – More Criminal Law proceedings and more Directors serving actual time in PRISON

The IS and BIS employs and runs specialist teams of Criminal Investigators looking specifically at offences relating to corporate failures as we reported during 2017.  We expect to see the number of Criminal cases against delinquent Directors (whether within Disqualification proceedings or generally) increase in the coming months, whether arising from, for example:

  • Failing to maintain/preserve/deliver up company books and records.
  • MTIC Fraud.
  • Breach of existing Director Disqualification Order/Undertaking and/or aiding and abetting such breaches (NDP is presently instructed on 4 such cases).
  • Fraud in anticipation of company winding up (section 206 of the Insolvency Act 1986 (‘the IA 1986’)) to include:
    • Concealing the company’s property or concealing debts due to or from the company.
    • Fraudulently removing the company’s property.
    • Pawning, pledging or disposing of company property obtained on credit that has not been paid for.
  • Transactions in fraud of creditors (section 207 of the IA 1986) to include:
    • Causing or making a gift or transfer from company property.
    • Concealing or removing any part of the company’s property.
  • Misconduct in the course of winding-up (section 208 of the IA 1986)

Fear not however!

There are Statutory and Common Law defences that can be deployed and used in answer to many of the above alleged offences. The key is to deploy and use the defences to best advantage.

  • FUTURE TREND 3 – Pursuing Director Disqualification cases against Directors where the company is not in a formal insolvency

We have addressed this in an earlier article. Such cases are pursued most commonly under section 8 of the CDDA.  Again, we expect to see more such cases pursued in the last months of 2018 and 2019.

  • FUTURE TREND 4 – Dissolved companies

We predict this will be a ‘biggy’!  On 26 August 2018, the IS and BIS announced a:

 ‘….new crackdown on reckless Directors, specifically those who have dissolved companies to avoid paying workers or pensions.’

This announcement followed (perhaps inevitably) as a Government reaction to the BHS debacle.  It is said that such Directors will be targeted for disqualification and fines.  On the face of it, an overdue remedy for a perennial problem.  How will it develop, however

Directors dissolving a company (rather than liquidating it) and being open to scrutiny to avoid paying creditors is a big problem that needs addressing.  We expect to see many disqualification cases in 2019 arising out of dissolved companies, where creditors are left unpaid.

Conclusion – Contact Us if Threatened With Director Disqualification

The world of Director Disqualification law and practice remains a moving feast, and we expect to see many, if not all, of the above predictions come true in 2019. However, one thing that remains a constant is that every Director faced with a Director Disqualification investigation needs to obtain the right advice at the earliest point and thus needs to act decisively.

Acting positively, decisively and quickly will always help the cause of the Director under attack.  Having the best legal advice available is the second part of that jigsaw.

There are lots of things the Director under attack can do.  Each and all of the matters dealt with above, merit and deserve an article to themselves. NDP are extremely well placed to help in respect of all such matters – click here to see some testimonials.

If you are a director threatened with disqualifcation, please contact us or call us on 0121 200 7040. Our director disqualification solicitors will be happy to discuss and advise you on the best course of action. The initial conversation is free.

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