Maximum ban for man in Turkey who removed £2.7m from British company
Hakan Cemal, and Sureyya Sitki Bektas, directors of Hey Trends Limited, have been banned for 15 years - the maximum possible – and 11 years, respectively, from acting as directors for what Registrar Briggs referred to as ‘the misappropriation of an entire business’.
The bans, from 5 November, follow a hearing at the High Court on 14 October after an investigation into the company by the Insolvency Service.
The ‘misappropriation’ referred to by the registrar was the selling of the business of Hey Trends Limited and diverting the proceeds to a connected company, dissipating moneys received in error a year after it had ceased trading, and failure to keep or delivery up accounting records.
Hey Trends Limited was part of a group under the “Hey” trading style based in Turkey which traded between 2003 and November 2011 in design, manufacture and export of clothing. Hakan Cemal was director throughout and Mr Cemal’s father-in-law, Sureyya Sitki Bektas was a director throughout, except between July 2005 to May 2006.
The investigation by the Insolvency Service found that on 30 November 2011 Hey Trends and an associated Turkish Company sold their respective businesses to a third party. Hey Trends immediately ceased operating. The terms of the Sale Agreement provided that the net sale proceeds of €10,540,000 were to be split 70/30 between the Turkish Company (€7,378,000) and Hey Trends (€3,162,000, which equated to £2,708,345).
Hey Trends did not receive its share of the net sale proceeds, these were held in the Turkish Company of which Mr Cemal and his wife held all the shares. Mr Cemal claimed it was a loan, although no security was sought or given. In short, there was no mechanism for recovery of these moneys other than Mr Cemal deciding to repay.
On 16 November 2012, almost exactly a year after Hey Trends had stopped trading and during which time virtually no transacting had occurred within the company’s bank account, £79,521 was paid into Hey Trend’s bank account in error by a third party who had no connection or trade whatsoever with it. Between 20 and 26 November 2012 those moneys were removed on instructions from Mr Cemal.
The Liquidator of Hey Trends received claims from creditors totalling £1,990,011, which means that the money extracted by Mr Cemal would have enabled all known creditors to have been repaid.
Additionally, the accounting records delivered up were so incomplete that the recipients and reasons for expenditure totalling £655,553 could not be verified. Furthermore, it was not possible to find out whether £189,081 received was for bona fide business purposes, nor was it possible to establish the true position of the company’s assets and liabilities
The current position as notified by Hey Trends’ Liquidator is assets of £114,452 and liabilities of £1,990,011
At the uncontested hearing, Registrar Briggs commented in relation to Mr Cemal:
The misappropriation of the entire business of the company is a very serious breach of duty and it is hard to think of anything of graver concern to creditors and the court.
And in relation to Mr Bektas:
I initially thought that, given that he was not a recipient and nor did he have any hands on dealing, the court should be more lenient in respect of him. However, he was a director and therefore liable in law although not a recipient of the sale proceeds. Therefore the period should also be in the top bracket, given the nature of the conduct.
Commenting on the disqualification, Cheryl Lambert, Chief Investigator at the Insolvency Service, said:
In this case the directors have diverted millions of pounds from a UK business to Turkey, through a sham transaction, leaving a trail of creditors. Taken with the opportunistic diversion of money knowingly received in error, this is tantamount to fraudulent activity.
The bans handed out by the court show that such abuse of the privileges of limited liability trading is regarded as at the most serious end of mischief and misconduct. Most particularly, directors need to be aware that inactivity does not absolve them of their responsibilities.
The investigation and outcome show that escaping to a jurisdiction outside the UK, and EU, is no barrier to the Secretary of State seeking out miscreants and obtaining sanctions against them to protect the business community.
At the date of Liquidation Hey Trends did not have any assets and liabilities of £126,178; HMRC are owed £74,903.
Notes to editors
Hey Trends Limited (CRO 04566535) was incorporated on 18 October 2002. Its registered office Northway House, 5th Floor, Suite 504-505, 1379 High Road, Whetstone, London N20 9LP and it traded from 58-60 Berners Street, London W1T 3NQ. The directors at the time of Liquidation were Hakan Cemal and Sureyya Sitki Bektas.
Hey Trends Limited was placed into Liquidation on 4 April 2013.
Hakan Cemal is of Istanbul, Turkey and his date of birth is 20 March 1974.
Sureyya Sitki Bektas is also of Istanbul, Turkey and his date of birth is 19 April 1956.
At an uncontested hearing at the High Court of Justice on 14 October 2015 Disqualification Orders were made against Hakan Cemal (15 years) and Sureyya Sitki Bektas (11 years).
A disqualification order or undertaking has the effect that without specific permission of a court, a person with a disqualification cannot:
- act as a director of a company
- take part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership
- be a receiver of a company’s property
In addition that person cannot act as an insolvency practitioner and there are many other restrictions are placed on disqualified directors by other regulations.
Further information on director disqualifications and restrictions is available.
The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. It may also use powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK. In addition, the agency authorises and regulates the insolvency profession, deals with disqualification of directors in corporate failures, assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees, provides banking and investment services for bankruptcy and liquidation estate funds and advises ministers and other government departments on insolvency law and practice.
Further information about the work of the Insolvency Service, and how to complain about financial misconduct, is available.
All public enquiries concerning the affairs of the company should be made to: Cheryl Lambert, Head of Outsourced Investigations, Investigations and Enforcement Services, The Insolvency Service, 3rd Floor, Abbey Orchard Street, London SW1P 2HT. Tel: 0207 596 6117. Email: Cheryl.Lambert@insolvency.gsi.gov.uk.
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Published: 17 November 2015
From: The Insolvency Service