11 March 2008 - Castlewellan director disqualified by the court

A Frames Limited (the Company) carried on business in the importation and distribution of commercial and private vehicles trading as EMS Imports and Global Imports from 21 Drumaroad Hill Castlewellan.

The company went into liquidation on 3 August 2005, with no known assets. The Official Receiver estimated liabilities of £562,944 and an estimated deficiency as regards creditors of £562,944. After taking into account the losses incurred by members (shareholders, including the director) of the company, the total estimated deficiency was £562,945.

The matters of unfit conduct, alleged by the Department of Enterprise, Trade and Investment (the Department) in relation to Edward Smyth, in respect of his conduct as a director of A Frames Limited and accepted by the Court included:

• Failing to submit a Statement of Affairs in respect of the Company;
• Failing to prepare trading accounts for the period 1 June 2002 to 3 August 2005;
• Failing to account for Company assets and failing to account for the trading activities of the Company;
• Failing to maintain and/or preserve and/or deliver up full accounting books and records for the Company;
• Failing to operate a company bank account for the Company and causing and permitting the Company to process company funds through his personal bank account;
• Failing to co-operate and to attend upon the Official Receiver for interview to account for the demise of the Company;
• Causing and permitting the Company to retain £479,533.37 in respect of VAT not paid over to the Crown and failing to co-operate with the Crown;
• Failing to file accounts with the Registrar of Companies within the prescribed time period for the years ended 30 November 1999, 30 November 2000 and November 2001 and failing to prepare and file accounts thereafter;
• Failing to preserve/maintain and deliver up statutory records;
• Failing to file annual returns.

In her Judgement, Master Kelly said: “This is a particularly serious case. The Respondent appears not only to have a cavalier attitude towards the conduct of his company's business activity but with regard to the investigations that both the Official Receiver and the joint liquidators had to undertake.

“His non-co-operation has prevented a full investigation into the affairs of the company and it is therefore impossible to determine the extent of the liabilities of the Company, the assets of the Company and what the Company's trading history was."

The Master could not see any grounds for mitigation in the case and said: “It seems to me that the Respondent is an individual whose attitude to the conduct of business is such that the public requires to be protected from it."

The Department has accepted 22 Disqualification Undertakings and the Court has made Orders disqualifying 18 directors in the financial year commencing 1 April 2007.

Notes to Editors:

1. The Official Receiver, when a company is wound up by the Court, has a duty to investigate the causes of failure and report any 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 9054 8516.
7. 7. The period of disqualification commences at the end of 21 days beginning with the day the Order was made by the Court.
8. For media enquiries contact DETI Press Office on 028 9052 9604.
9. Outside office hours, please contact the Duty Press Officer via pager number 07699 715 440 and your call will be returned.