Breaching a Director Disqualification Can Mean Prison

A Director is Sent to Prison for Breaching his Director Disqualification Undertaking. 

The penalty for breaching a director disqualification undertaking can be a prison sentence, as this press release, dated 24th July 2015, from the Insolvency Service (‘IS’) shows. It reports that Eoin Frederick Murray (‘Mr Murray’) was sentenced to a total of 21 months in prison at Plymouth Crown Court after pleading guilty to acting in the management of limited companies whilst disqualified as a director (amongst other matters).

In addition, David John Constable (‘Mr Constable’) was sentenced to 4 months in prison on 4 counts of aiding and abetting Mr Murray in the management of two companies.

Mr Murray was acting as a director in South Devon Construction SW Limited, which was placed into compulsory liquidation on 14 August 2012.

What was the cause of Mr Murray’s Original Director Disqualification?

It would appear that Mr Murray was a serial offender in that he had earlier (according to the IS press release) provided director disqualification undertakings in December 2006 and October 2007, for 6 and 9 years respectively, thus banning him from being involved in the management of a UK company without the permission of the Court until October 2016. In addition (it is reported that) Mr Murray had been made bankrupt (for the third time) on 10 January 2011.

It is actually worth repeating word for word the wording of the press release:

Mr Murray claimed to be merely an employee of the companies concerned, but in fact played a leading role in their formation and management. Mr Constable was appointed director as ‘cover’ for Mr Murray and allowed him to continue to wield authority within the companies, principally South Devon Construction SW Limited.

A feature of Mr Murray’s trading style was to routinely issue cheques to those working for him and to suppliers knowing there were insufficient funds to cover them. He was also in the habit of issuing cheques, which he then stopped before presentation or clearing, to avoid satisfying debts.

Mr Murray pleaded guilty to 3 counts of acting in the management of a company whilst disqualified, 2 counts of acting in the management of a company whilst an undischarged bankrupt and 7 counts of fraud by false representation, relating to a number of unpaid cheques.

Bearing in mind the facts as set out and the criminal convictions it is perhaps unsurprising that Mr Murray was sentenced to a term of an imprisonment for breaching his director disqualification undertakings. This case also goes to show the risks that a director who is not appointed at Companies House runs when they can be found to have been acting in the management of a company whilst disqualified.

Mr Murray and Mr Constable Could Face Further Punishments, Including Misfeasance Claims

The press release does not say, but both Mr Murray and Mr Constable could have also been further disqualified as directors by the Criminal Court  based on their convictions.

In addition Mr Murray could now be made personally responsible for the company debts under section 15 of the CDDA. Mr Constable may also be found responsible under section 15 because he allowed Mr Murray to act as a director whilst disqualified:

“(1) A person is personally responsible for all the relevant debts of a company if at any time …

 (b) as a person who is involved in the management of the company, he acts or is willing to act on instructions given without the leave of the court by a person whom he knows at that time to be the subject of a disqualification order or disqualification undertaking…”

Unfortunately, for Mr Murray and Mr Constable it perhaps does not stop there as the liquidator could also bring proceedings, perhaps to include for Misfeasance Claims, click here and here, seeking personal, financial recovery against each and both of them.

We Can Help if You Are Facing Director Disqualification or a Misfeasance Claim

As this case shows, the consequences for breaching a director disqualification undertaking are serious. As director disqualification solicitors, we know that being disqualified from acting as a director can have serious business and personal consequences for a director and his/her family.  Acting positively as early as possible is vitally important, and allowing NDP to help may eliminate the prospect of disqualification, or result in a lower period of disqualification.

If you are facing an investigation from the UK Insolvency Service, a UK based liquidator or administrator or a creditor is threatening a claim against you please call us on 0121 200 7040, contact us or why not email us a scan of the threatening letter and we will call you back to discuss on a no-obligation/no-cost basis? We will work around you wherever in the world you are based.  The sooner you talk to us the more we can likely help.

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