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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.

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.

Directors Under Attack

Directors Under Attack

Directors Under Attack? Recent Trends in Director Disqualification

Neil Davies, examines and analyses 8 key trends, which our Director Disqualification Solicitors have noticed over the last 12 months. As a law firm specialising in defending directors who are threatened with disqualification, the evidence suggests that they are under greater attack from the Insolvency Service (IS) than before. We have successfully defended many directors threatened with disqualification.

These are worrying trends for directors, and they are detailed below. In our next article we will predict what we think might happen during the next 12 months in the world of director disqualification.

Click here to see the Infographic

Summary of Director Disqualification Trends

We have identified (and discuss below) the following 8 trends, all of which represent an increase in the Insolvency Service’s armoury for use against directors:

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

Scroll down for more,

Our Director Disqualification Experience

Our solicitors are, at any point in time, representing and advising many Directors in Director Disqualification cases. Click here to see some testimonials. NDP Director, Neil Davies – formerly an advisor to the Insolvency Service and now a Consultant Editor to the leading disqualification work, Mithani: Directors’ Disqualification says:

“The time when a Director could simply sign off a Director Disqualification Undertaking, believing that to be an end of his woes (if such time ever really existed) has long since gone.

Directors signing Director Disqualification Undertakings (or being made subject to Court imposed Director Disqualification Orders) now face the very real prospect  of parallel and consequential personal attack (pursuing financial claims) from amongst others, the Liquidator of the failed Company, the Insolvency Service (who may also now pursue a Director Disqualification Compensation Order) and a Criminal law investigation/prosecution.

 The need for expert care in dealing with and disposing of a Director Disqualification investigation has never been greater.”

TREND 1 – New types of (allegedly) unfit conduct being investigated and pursued by the IS against Directors

We have noticed new and different types of misconduct being alleged and pursued by the IS. These are in addition to the old IS favourites, which include:

  • ‘Allegations of trading to the detriment of the Crown’ and
  • ‘Failing to maintain and/or preserve and/or deliver up company books and records’.

New allegations

Increasingly, allegations against Directors/officers now include:

  • Data Related Breach: Causing or allowing the company to fail to comply with an Order of the Information Commissioner’s Office (‘ICO’).  In the new regime introduced by the GDPR (General Data Protection Regulation), this trend is likely to increase as more companies fail to understand/comply with their obligations under the new law.
  • Illegal Workers: Causing or allowing a company to employ illegal workers, whether or not the company is in a formal insolvency process).
  • Criminal Conduct: Causing or allowing the company to become involved in Criminal conduct (see below).
  • Health & Safety: Failing to ensure that the company complied with its obligations under the Health and Safety at Work Act 1974.  For example, we have seen a case where an employee fell through the roof of a barn and sustained serious and life changing injuries.

A company may have adequate insurance to cover direct financial claims by an injured person, but this is a developing area of law, requiring specialist advice. Such claims are often massive. Criminal allegations and Director Disqualification allegations may follow against Directors.

Types of specific conduct which can be pursued are, it seems, discretionary decisions for IS/the Secretary of State (‘SOS’).  This is a moving, developing feast.

TREND 2 – Investigating and pursuing criminal law offences via the Director Disqualification route

We are seeing numerous (and an increasing volume of) cases where criminal law offences are being investigated and pursued via the director disqualification route, which has historically been for civil cases.

Examples include:

MTIC fraud allegations were historically pursued through the Criminal Court with successfully prosecuted Directors facing years behind bars.   Now we are seeing such cases being pursued through the Civil Courts.  Quite a change in approach, perhaps caused by a strain on ever shrinking Criminal Legal Aid budgets.  NDP has successfully opposed such cases for Directors.  Making IS prove its case (which is difficult for the IS) is essential.

  • Books and records cases: Failure to maintain/preserve/deliver up adequate company records. We are now seeing such cases pursued in both Civil and Criminal Courts, sequentially. This is a big change and we think will be a big development in 2019. There are statutory and common law defences available to the Directors in such cases. NDP have successfully run such defences.

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

Most Director Disqualification cases are pursued under section 6 of the Company Directors Disqualification Act 1986 (‘CDDA’) which states:

“6       Duty of court to disqualify unfit directors of insolvent companies.

(1)     The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied:

  • that he is or has been a director of a company which has at any time become insolvent (emphasis added) (whether while he was a director or subsequently), and
  • that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of one or more other companies or overseas companies) makes him unfit to be concerned in the management of a company.”

However, increasingly, directors of solvent companies are being pursued

Pursuit of a Director of a solvent company is the exception rather than the norm.  Such cases are pursued most commonly under section 8 (rather than section 6) of the CDDA. Section 8 states:

“8       Disqualification of director on finding of unfitness.

(1)     If it appears to the Secretary of State that it is expedient in the public interest that a disqualification order should be made against a person who is, or has been, a director or shadow director of a company, he may apply to the court for such an order.”

So, when is section 8 used?

We have (for example) seen section 8 deployed in recent times, to pursue a Director of an on-going, trading company which employed illegal workers.  We represented and successfully opposed disqualification claims against the relevant Director.  Our arguments were based upon the facts of that case, where we secured a victory for the Director, despite a Criminal conviction against the company for the offence of employing legal workers.

Unlike some other firms, we never forget that every case turns upon its own particular facts and the very best presentation of those facts.

TREND 4 – Admissions made in (civil) Director Disqualification proceedings coming back to haunt directors in criminal proceedings

The Insolvency Service set up a stand-alone team of Criminal investigators during 2017. It is unsurprising, therefore, that we are now seeing many Criminal cases being pursued against Directors, as those investigators progress their investigations into pursued cases.

For example:

NDP currently represent a Director who, with the benefit of advice from a large London law firm, entered into a Director Disqualification Undertaking.  The Undertaking was given upon terms where the Director admitted, in these Civil proceedings, 2 Criminal law offences, carrying terms of imprisonment, if proved against him in a Criminal Court.

Having made those admissions in Director Disqualification proceedings for the purposes of Civil law, the Director is now being criminally prosecuted.  The prosecution is for the same books and records offences – under section 386 of the Companies Act 2006 (‘duty to keep adequate accounting records’) and section 387(i) of the same Act, (‘failure to preserve accounting records’).  Specialist advice is essential in these situations. There are here (for example) abuse of process arguments available to the Director.

Whilst the Criminal prosecution authority must discharge a higher burden of proof than in Civil proceedings to secure a Criminal conviction, this is a worrying trend for Directors.

In short, Directors can no longer safely admit in a Civil context, Criminal law offences without very careful analysis of the potential wider impact.

TREND 5 – The IS investigating and pursuing allegations of unfit conduct, relying upon unproven and disputed matters of fact

In our opinion, it can never be appropriate to make such allegations of Unfitness against a Director in disqualification proceedings, where there is a significant factual disagreement as to the underlying case.

The disqualification arena is not the right forum for such matters to be determined. Nevertheless, NDP have seen (and successfully opposed) such conduct by the IS in recent times.

TREND 6 – ‘What, no draft evidence?’

 The Insolvency Service is issuing section 16 Company Director Disqualification Act letters, threatening commencement of Disqualification proceedings, without having draft evidence available to give to the Director (despite what is said and offered in the Section 16 Letter!).

 The ‘Section 16 Letter’ is the letter from the IS to the Director, which tells the Director:

  • He/she is about to be made subject to Director Disqualification proceedings based on the allegations of ‘Unfit conduct’ set out in the Section 16 Letter.
  • The period of Director Disqualification ban to be sought against the Director.
  • That the Director can make written representations in response to the Section 16 Letter (most obviously, responding to the unfitness allegations made against the Director).
  • That the Director can request from the IS the draft written evidence that is to be relied upon against the Director, right there and then.

All good so far…except in a number of cases we have recently been involved in, where we have requested the offered draft evidence from the IS. However, in several cases, we have established that no draft evidence has yet been prepared by the IS, despite what the Section 16 Letter says.

Our Comments

In our view, the IS position is wholly inadequate. Failure to provide evidence is a trend that should be strongly opposed (i.e. by demanding from the IS the draft evidence) on each and every occasion it happens.

Director Disqualification cases inevitably turn upon their own particular facts.   This is regardless of how straightforward a case might appear at first sight.  It is imperative, therefore, to see and understand the written and documentary case that the Director faces.

Director Disqualification cases are won (and lost!) on the interpretation and understanding of the evidence. This analysis cannot happen without the IS producing the draft evidence.

TREND 7 – Internal procedures within the IS – potential or actual conflict of interest.

The Insolvency Service is advised by a Panel of external Solicitors.  Possibly due to the absence of enough qualified IS staff, we have seen a growing trend of Panel Solicitors investigating the IS’ cases.  The issue arises when the Panel Solicitors recommend that their cases be pursued and the self-same Panel Solicitors pursue those cases.

In our view, that is a recipe for problems.  Potential or actual conflict of interests can easily arise in such cases.   Experienced advisors such as NDP can readily identify the weaknesses – and likely weaknesses – for Directors in such situations.

TREND 8 – ‘Go straight to jail’ for Breaches of Disqualification Orders and Undertakings.

The Insolvency Service are taking an ever more pro-active approach to perceived breaches of Disqualification Order and Disqualification Undertakings by already disqualified Directors.  The IS often notified of such breaches by aggrieved creditors.

Director Disqualification

  • Is Prison a Possible Outcome? Yes

Directors really do now go to prison for such breaches.   Judicial Guidelines have recently been revised.  The revised Guidelines include direction that Judges should as a starting point issue prison sentences to Directors who breach a Disqualification Order/Director Disqualification Undertaking.

A Director breaking a Disqualification Order/Director Disqualification Undertaking is thus liable to be imprisoned and/or made subject to a fine. That is in addition to the Director becoming personally liable to pay company debts by reason of that breach.  Serious stuff indeed.

  • Recent case law – Mr Sarkis Kouyoumdjan

Take the case of Mr Sarkis Kouyoumdjan (‘Mr Kouyoumdjan’), who was banned under section 6 of the CDDA for 4 years in November 2011, because he had ‘caused’ his failed company not to pay taxes.

Mr Kouyoumdjan breached the Disqualification Order by continuing to run 2 branches of a restaurant brand in London.

  • Off to the Magistrates Court he goes…

The IS commenced a Criminal investigation.  Mr Kouyoumdjan pleaded guilty on 5 September 2018, to:

  • 4 counts of running companies whilst disqualified,
  • 2 counts of using a prohibited company name,
  • 1 count of fraudulently removing property in anticipation of the company Winding-Up; and
  • 1 count of failing to deliver up books and records.

The Result – a 14 month Prison Sentence

 Mr Kouyoumdjan was jailed for 14 months. He also received a further 9-year disqualification ban, imposed by the Criminal Court.

We envisage seeing many more such breach cases pursued as Criminal cases in the coming months.

The key question is: why would a Director take the unnecessary risk of breaching a disqualification order or undertaking, when skilled legal advice at an earlier stage would avoid the problem ever occurring?

  • The Solution? Seek Permission!

Directors have no need to play with fire as Mr Kouyoumdjan did.

Having been banned for 4 years back in 2011, Mr Kouyoumdjan could have applied to the Court for Permission to Act in respect of the management of the ongoing restaurant businesses.

It is likely that on a well drafted (and brilliantly presented!) application to the Court by him, he would have been granted Permission to act (albeit perhaps subject to conditions).

Mr Kouyoumdjan would thus have escaped the prospect of public stigma and criticism, Criminal law investigation, prosecution, conviction, imprisonment and possible Criminal Confiscation proceedings.

  • Applications for Permission

Yes, there is a cost involved in instructing Director Disqualification Solicitors, such as NDP, to pursue a Permission application.

There is however a much greater financial (not to mention reputational and emotional) cost in instructing Criminal Defence Solicitors and Barristers to try and keep the Director out of prison for breaching the Order.  Let me think…!

Our recent experience is that the IS and the Court deal with such Permission applications sensibly and on their merits.  Permission is often granted to Directors on well-presented applications.

Conclusion. Directors are Under Attack More Than Ever. Act Quickly and Act Decisively

The world of Director Disqualification law and practice remains a moving feast.  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, even under greater attack.  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 of our testimonials. Contact us or call us on 0121 200 7040

Neil Davies (October 2018)

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