Two directors from retail chain ‘Mark One’ disqualified as directors and jailed for controlling companies whilst already disqualified. 

In a recent press release the Insolvency Service confirmed that two directors of the former high street shop chain trading as ‘Mark One’ or ‘MK One’: Mark Brafman and Bulbir Singh Sandhu were sentenced to eight months and five months in prison respectively after a prosecution brought by the Department for Business. They were also disqualified as directors for a further twelve years each after proceedings were brought by the Insolvency Service.

The Punishment

This severe punishment was meted out because:

1. Mr Brafman pleaded guilty to:

– Acting as a director of three companies whilst he was already disqualified as a director; and

– Acting as a director of a fourth company whilst an undischarged bankrupt.

2. Mr Singh Sandhu pleaded guilty to acting as a director of two of the companies whilst already disqualified as a director.

Confiscation Proceedings

In addition Confiscation proceedings have been commenced by the Department for Business against both individuals.

Put simply this means that both of these individuals may be deprived of the financial benefit that they have obtained from criminal conduct (arising from their convictions).

Warning

Commenting upon the case, Deputy Chief Investigation Officer Liam Mannall from the Department for Business said:

This case should serve as a warning to anyone flouting the law governing the running of companies: you will risk investigation, prosecution, a criminal conviction, and imprisonment.”

The Legal Position

This case, the convictions and the disqualifications arising from the Company Directors Disqualification Act 1986 (“CDDA”) serves as a warning of the high risks that directors take if they act as directors whilst disqualified and or bankrupt.

Under section 13 of the CDDA, criminal penalties for contravention of a disqualification order / undertaking or being guilty of the offence of acting as a director of a company whilst an undischarged bankrupt (under section 11 of the CDDA means that an individual is liable upon conviction to imprisonment of up to two years and / or a fine or both.

Comment

The individuals concerned could have initially made representations to the Insolvency Service prior to being disqualified for the first time to reduce their subsequent periods of disqualification as directors.

In addition they could have considered making an application to Court for permission to act as directors whilst they were disqualified from acting as directors to regularise their position and protect themselves from liability.

UNFORTUNATELY FOR THE INDIVIDUALS CONCERNED THERE IS EVEN MORE

The one law that is not referred to by the Insolvency Service in their press release is that by way of section 15 of the CDDA, a person is personally responsible for all the relevant debts of a company if at any time they act in contravention of a disqualification order or disqualification undertaking they are involved in the management of the company or acting as a director of a company whilst an undischarged bankrupt.

Liability still does not even stop there – if a person who is involved in the management of the company, 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 made or disqualification undertaking accepted or to be an undischarged bankrupt then that person is also personally responsible for all the relevant debts of a company.

In addition the re-use of the trading or company name ‘Mark One’ or ‘MK One’ may be restricted in law meaning that the directors (and others) are opening themselves up in a different way again personally financially to creditors with the further risk of criminal action.

In addition again the office holder – the Liquidator perhaps – could take other action against the directors’ personally to make further recoveries for creditors of the companies.

THE POTENTIAL FINANCIAL AND CRIMINAL CONSEQUENCES

Behind all the legal detail, this case shows the potentially severe personal financial and criminal consequences that could flow by not (it appears) taking the right advice at the right time on the part of directors and (perhaps unintentionally) others acting upon their instructions.

NDP has the strength, breadth and depth of experience to advise upon all of the above mentioned areas of law. It is absolutely imperative that the right advice sought early if you have any type of director disqualification problem, as the sooner we hear from you, the more we can do to help.

You should contact us straight away for a free initial discussion.