Belfast director agrees to disqualification

The Department of Enterprise, Trade and Investment (the Department) has accepted a disqualification undertaking for seven years from Steven Deepak Kher (49) of Deramore Park, Belfast in respect of his conduct as a director of Netcom Communications Limited and MMWSO Limited.

Netcom Communications Limited commenced trading on 29 December 1988 as a supplier of goods and services in the telecommunications sector and went into liquidation on 20 July 2006 with estimated assets of £247,664, preferential creditors of £5,054, liabilities of £1,449,493 to non preferential creditors and an estimated deficiency as regards creditors of £1,206,883. After taking into account the losses incurred by members (shareholders, including the directors) of the company, the total estimated deficiency was £1,206,885.

MMWSO Limited was originally incorporated under the name Atlas Communication (UK) Limited on 19 January 1982, trading successfully as a business providing a range of communications equipment and network services.

On 10 October 2000 the company name was changed to Eircom NI Limited and in November 2002 the entire share capital was acquired by Netcom Communications Limited. On 14 January 2003 the company name was changed to Atlas Communications (NI) Limited, and on 10 April 2006 the assets of the company were sold to Morriston Limited to address financial difficulties associated with the parent company, Netcom Communications Limited.

To facilitate this transaction, the name of the company was subsequently changed to MMWSO Limited. The consideration for the sale proved insufficient to address the consolidated financial position and also resulted in the insolvency of this company.

A proposal by the company for a Company Voluntary Arrangement was rejected by the creditors and the company went into liquidation on 20 July 2006 with estimated assets of £673,208, liabilities of £1,200,000 and an estimated deficiency as regards creditors of £526,792. After taking into account the losses incurred by members (shareholders, including the directors) of the company, the total estimated deficiency was £1,086,792.

The Department accepted the disqualification undertaking from Stephen Deepak Kher on 10 December 2008 based on the following unfit conduct which solely for the purposes of the disqualification procedure was not disputed:

NETCOM COMMUNICATIONS LIMITED

Filing a sworn Statement of Affairs which was materially inaccurate by £448,742 in that debtors and stock were materially overstated and when an adjustment was made, the total resulting deficiency was restated from £758,143 to £1,206,885;

Preferring himself above all other unsecured creditors by withdrawing £146,989 on 18 April 2006 to repay a loan he made to Netcom Communications Limited, before the company passed a resolution for voluntary liquidation in which he knew he would not have been fully repaid;

Failing in his duty to co-operate with the liquidator as office holder, contrary to Article 199(2) of The Insolvency (Northern Ireland) Order 1989, in that he failed to respond to any correspondence issued to him and he failed to deliver up information requested;

Failing to pay pension contributions totalling €2,672.13 deducted from employee’s wages to the pension scheme provider, contrary to the Occupational Pension Schemes (Scheme Administration) Regulations 1996 as enshrined in Articles 49 and 86 of the Pensions (Northern Ireland) Order (SI 1995/3213 (NI 22)) as amended by Article 246 of the Pensions (Northern Ireland) Order 2005 (SI 2005/255 (NI 1));

Failing to file accounts on time for Netcom Communications Limited for the year ended 31 December 2002 and 31 December 2003, contrary to the provisions of the Companies (NI) Order 1986 as amended;

Failing to maintain adequate books and records for Netcom Communications Limited, contrary to Article 229 of the Companies (Northern Ireland) Order 1986, in that entries from day to day transactions were not maintained in the last few months before liquidation and therefore an accurate record of the assets and liabilities of the Company was not maintained.

MMWSO LIMITED

Filing a sworn Statement of Affairs for MMWSO Limited as at 20 July 2006 which was materially inaccurate by £390,451 in that debtors and stock were materially overstated and when an adjustment was made, the total resulting deficiency was restated from £696,341 to £1,086,792.

Preferring himself above all other unsecured creditors by withdrawing £150,025 from MMWSO Limited’s Bank of Ireland account to repay a loan he made to MMWSO Limited before the company passed a resolution for voluntary liquidation on 20 July 2006.

Failing in his duty to co-operate with the liquidator as office holder, contrary to Article 199(2) of The Insolvency (Northern Ireland) Order 1989, in that he failed to respond to any correspondence issued to him and he failed to deliver up information requested.

Failing to file accounts on time for MMWSO Limited for the periods ended 31 December 2002 and 31 December 2003, contrary to the provisions of the Companies (NI) Order 1986 as amended.

Failing to maintain adequate books and records for Netcom Communications Limited, contrary to Article 229 of the Companies (Northern Ireland) Order 1986, in that entries from day to day transactions were not maintained in the last few months before liquidation and therefore an accurate record of the assets and liabilities of the Company was not maintained.

In cases where a director offers a disqualification undertaking acceptable to the Department, thus avoiding a full hearing of the matter before the court, a shorter period of disqualification than would otherwise be appropriate is normally imposed.

The Department has accepted 18 Disqualification Undertakings and the Court has made Orders disqualifying two directors in the financial year ending 31 March 2009.

Notes to Editors:

1. Insolvency Practitioners acting as voluntary liquidators, administrative receivers and administrators have a duty to report unfit conduct to the Insolvency Service within the Department of Enterprise, Trade and Investment.
2. The aim of the Department is to bring disqualification proceedings against those directors of failed companies who have abused the privilege of limited liability status through negligence, incompetence or lack of commercial probity. The legislation contained in the Company Directors Disqualification (Northern Ireland) Order 2002 (“the 2002 Order”) is for the protection of the public and trading community, but its operation should not inhibit genuine enterprise.
3. In cases where a person is subject to either a Disqualification Order made by the Court or a Disqualification Undertaking accepted by the Department, that person shall not be a director of a company, act as a receiver of a company's property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless he has the leave of the High Court. A disqualified person cannot obtain permission to act as an Insolvency Practitioner.
4. Article 9 of the 2002 Order provides that where a director is found to be unfit he must be disqualified for a minimum period of two years, up to a maximum of fifteen years. The Courts have decided that the level of seriousness of unfit conduct can fall into three brackets with the top bracket of periods over ten years reserved for particularly serious cases, six to ten years reserved for cases which do not merit the top bracket and two to five years for cases where, although disqualification is mandatory, the case is less serious.
5. The 2002 Order also allows directors, with the agreement of the Department, to avoid the need for a court hearing by offering an acceptable Disqualification Undertaking. This has exactly the same legal effect as a Disqualification Order made by the court, and will usually include a schedule identifying the director’s unfit conduct. The consequences of breaching a Disqualification Undertaking are the same as those for breaching a Disqualification Order.
6. If anybody contravenes a Disqualification Order or breaches their Disqualification Undertaking they may be committing a criminal offence and could go to prison for up to two years or face a fine or both. Any person with information to suggest that a disqualified person has acted in contravention of this provision should contact The Insolvency Service’s Directors Disqualification Unit on 028 90 548516.
7. The period of disqualification commences at the end of 21 days beginning with the day the Disqualification Undertaking was accepted by the Department.
8. Media enquiries please contact DETI Press Office, telephone 028 9052 9297. Out of office hours, please contact the Duty Press Officer via pager number 07699 715 440 and your call will be returned.