company Investigations
Contents • Introduction – who, what, why? • Disqualification – misconduct types • Criminal referrals • Legislative developments
Who? Investigations and Enforcement Services
What and Where? Manchester Edinburgh Leeds Insolvent Inv. Insolvent Inv. Insolvent Inv. Live Inv., Criminal Inv . Cardiff Birmingham Bristol Nottingham Criminal Inv. Insolvent Inv. Insolvent Inv . Criminal Inv. Southend Croydon London Southampton Watford Insolvent Inv. Insolvent Inv. Insolvent Inv. Insolvent Inv . Criminal Inv. Live Inv.
And we get our work from… Compulsory Liquidations (Official Receiver in E & W) Office Holder conduct returns (Voluntary Liquidations, Administrations, Admin Receiverships) Public complaints and media monitoring/ OGD liaison
Some numbers….2018/19 results • Insolvent reports reviewed – 9,059 • (sifted in conduct returns) • Investigations commenced – 1,248 • (target rate 13.7%) • Disqualifications obtained – 1,242 • Average timeliness 19.9 months from insolvency • Average period 5.6 yrs, therefore around 7,000 disqualified individuals at any one point in time • 372 Section 216 Breach rectifications (re-use of company name) • 229 Criminal Referrals
So what? Net benefit to the market place of £100,000 for every director disqualified. Average ban 5.6 years, around 7 - 10% top bracket Typically up to 30 people jailed each year, for an average period of 6 - 12 mths, for continuing to run companies whilst banned. Section 15 CDDA provides for personal liability. Publicity maximised to provide a deterrent and protect the vulnerable: Investment schemes/ Oppressive Sales Techniques Pensions scams BHS/ Carillion/ Keeping Kids Company
How do I get myself disqualified? …Some general rules… Dishonesty is not a pre-requisite, serious negligence and/ or incompetence suffices. Abrogation of duty is grounds for disqualification. No monetary limits – detriment in the context of trading level. Public Interest criteria kept under constant review. Sufficiency of Evidence and Unfitness …The top five countdown…
The top five countdown: Misappropriation of assets Criminal breaches Post insolvency actions Accounting records Discriminatory treatment (… usually against HMRC…)
Finalising the sanction • Directors are offered a chance to undertake • Undertakings achieved in around 80% of cases • Costs sought where proceedings issued • Proceedings issued in around 30% of cases • <5% subsequently withdrawn or lost • Section 17 applications for leave to act • Typically around 40 – 50 per year with half granted subject to conditions.
Tax-dodging Dundee newsagents banned from directorships (Dundee Courier) • Mohammed Arshid ,61, and Maqsoodan Arshid, 57 cheated the taxman out of more than £1 million to pay for the private education of their children and home improvements • The business under-declared and concealed tax liabilities for 17 years, submitting false P35 returns and concealing VAT liabilities between 1996 and 2013 causing lost tax revenue of over £900,000 • Bans of 11 years for Mr Arshid and 2 years for Mrs Arshid • Mr Arshid previously jailed for perjury in helping to clear a man who had been accused of threatening a business associate with murder by the Taliban.
It’s criminal…
Legislative Developments • Powers to obtain compensation orders against directors where their conduct has direct causal link to loss of a creditor or class of creditor. • Able to obtain a disqualification order following an overseas conviction for a corporate offence. • Presently legislating to permit the investigation of dissolved companies and the disqualification of directors of holding companies who unreasonably sell insolvent subsidiaries.
Contacts Robert.Clarke@insolvency.gov.uk Steven.McGinty@insolvency.gov.uk Peter.Rout@insolvency.gov.uk www.gov.uk/insolvency-service
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