Director’s illogical conduct leads to ban

United Kingdom

A director of a company incorporated in the United Kingdom, has been disqualified from acting as a director for 5 years for breaching his duty to act in the best interests of the company by causing or allowing payments totalling £314,588 to be made to third parties.

These payments were of no benefit to the business and creditors suffered as a result, in particular Her Majesty’s Revenue & Customs (HMRC).

On 2 March 2016, the Secretary of State accepted a disqualification undertaking from Anthony Southwood, a director of Logical Security UK Limited (Logical), effective from 23 March 2016, for 5 years.

Logical went into liquidation on 11 March 2014. An investigation by the Insolvency Service found that from 1 November 2013 onwards Logical had been chased by HMRC in regard to its failure to submit VAT returns and pay VAT due. Meanwhile throughout November and December 2013, Logical instead made payments to vehicle auction houses and a used car dealership totalling £164,830. Logical also paid a third party £36,624 and this was followed in early January 2014 with a further transfer of funds totalling £78,687 to the same third party.

On 24 January 2014, Mr Southwood sought insolvency advice but on the same date caused a payment of £34,447 to be made to a further third party.

In total, £314,588 went from Logical’s bank account. No company books and records were delivered up to the liquidator or to the Insolvency Service to provide an explanation for the transfers and payments.

At the date of liquidation, Logical had liabilities of at least £170,680, but only £10,500 in cash at the bank. No vehicle assets have been disclosed to or recovered by the liquidator.

In this particular case, Mr Southwood was requested to explain the nature and purpose of a number of transactions or deliver up accounting records that were capable of explaining this; Mr Southwood failed to do this. Commenting on the disqualification, Sue Macleod, Chief Investigator at the Insolvency Service, said: “Company directors should note from this enforcement result that any failure to maintain or deliver up accounting records is likely to lead to serious censure…This disqualification is a reminder to others tempted to do the same, that the Insolvency Service will rigorously pursue enforcement action and seek to remove from them the privilege of trading with limited liability to protect the public for a lengthy period.”


For more information on any aspect of this briefing please contact any member of the Marbury team.

Source: UK Insolvency Service