Are your directors up to speed with their duties?

directors' duties Nov 11, 2021

As the Insolvency Service is quite rightly vigorously pursuing those who have made fraudulent claims for help during the Covid crisis, they are likely to be scrutinising all businesses more closely.

The number of company directors convicted of criminal activity during the pandemic has risen 205% to 122 in the year to 30 September, up from just 40 for the same period to 30 September of last year. The National Audit Office has also estimated that up to 60% of Covid BBL claims could be fraudulent or defaulted on.

There are plenty of other pressures on businesses and in particular their directors in trying to return to more normal activity in the face of a disrupted supply chain, rising energy prices and recruiting difficulties.

But it is not all doom and gloom. Times like these can also be seen as an opportunity to take a close look at what your business is offering and whether it can be tweaked to better meet the current conditions, not least the climate crisis.

It also seems a good...

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Director scrutiny over covid loans

Closing an insolvent business is a horrible experience but disqualification from being a director is even worse.

In a recent case in the North of England the director of a retail business was disqualified for 11 years after it was concluded that he had overstated his turnover when claiming a Covid Bounce Back loan.

The regulations state that eligibility for a loan was in doubt given that they should be for less than 25% of the previous year’s turnover.

It appeared that the business had already ceased trading the previous year but insolvency officials said he should have known that turnover had been insufficient to qualify for the loan, which was paid out in May 2020.

It also found that he had failed to provide sufficient records to establish what the funds were used for.

This situation emphasises the duties on directors to not only keep accurate and detailed financial records but also to ensure they comply with all their duties when applying for a Covid-related BBLS or CBILS...

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Directors’ duties and liabilities survive insolvency – a new court ruling

A recent High Court ruling on directors’ duties after insolvency has said that they cannot buy assets from their liquidated companies at below market value.

The ruling was made after solicitors for the company’s second liquidator who took over the case, Stephen Hunt, argued that Brian Michie as former owner and director of the construction company, System Building Services Group Ltd, had “unfairly bought a two-bedroom house from the original insolvency practitioner involved for £75,000 less than it was worth, 18 months after his company went out of business”.

The company went into administration in July 2012, and then into a creditors’ voluntary liquidation in July 2013 following which Mr Michie bought the property in Billericay, that was owned by his company, for £120,000 in 2014 from the previous liquidator Gagen Sharma.

The case revolved around whether director’s duties survived the insolvency of a company and specifically those...

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