No insulation from disqualification for director who failed to account for missing assets and funds
Andrew Rushton, the director of a PV Solar Fit Ltd, a company involved in supplying energy efficient insulations has been disqualified for 8 years.
An investigation by The Insolvency Service found that Mr Rushton had failed to account for more than £90,000 assets purchased by his company and had transferred in excess of £122,000 to his partner at a time when he knew the company owed customer money it had received erroneously and had no prospect of repaying. The customer in question had notified him of the erroneous payments.
Furthermore, in addition to failing to account for more than £82,000 worth of motor vehicles almost £8,000 worth of other equipment , purchased by the company, the company’s failure to maintain adequate accounting records and deliver them up to the Liquidator, resulted in other expenditure totalling almost £600,000 remaining unexplained, and the financial position at liquidation regarding debtors and creditors remaining unverified.
Robert Clarke, Chief Examiner at Insolvent Investigations North said:
Directors, like this, who favour themselves over the interests of legitimate creditors when their company is in financial difficulty and remove funds for personal benefit, leaving suppliers high and dry, are not only in breach of a fundamental fiduciary duty but lacking in commercial morality.
What’s more, the failure to maintain records which adequately explain the transactions of the company means that it is not possible to determine whether further funds, of a substantial amount, have been similarly misused contrary to creditor interests.
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.
Notes to editors
Mr Rushton’s date of birth is 12 January 1968 and he resides in Lancashire.
PV Solar Fit Ltd (CRO 07658263) was incorporated on 6 June 2011, and latterly traded from Venture Court, Metcalfe Drive, Altham Industrial Estate, Accrington, Lancashire, BB5 5TU as an installer of energy efficient insulations.
Mr Rushton was a director from 6 June 2011 and remained in office as at 3 October 2013, the date of Liquidation. The Statement of Affairs as at the date of Liquidation showed that PV Solar Fit had an estimated total deficiency of £316,000.
On 2 September 2015, the Secretary of State accepted a Disqualification Undertaking from Mr Rushton, effective from 29 September 2015, for a period of 8 years. The matters of unfitness, which were not disputed by Mr Rushton as per the Disqualification Undertaking, were that:
I failed to ensure that PV Solar Fit Limited (PV Solar Fit) maintained and/or preserved adequate accounting records, or in the alternative, I failed to deliver up such records to the Joint Liquidators for the period from 01 December 2012 to 3 October 2013. As a result, it has not been possible to:
- determine how the following assets, or the disposal proceeds thereof, had been accounted for:
- motor vehicles purchased by PV Solar Fit between 28 March 2012 and 09 November 2012, which were disclosed in the accounts for the year ended 3 November 2012 as having a net book value of £59,525
- further vehicles purchased by PV Solar Fit between 28 March 2012 and 06 March 2013 at a cost of £22,700
- gym equipment acquired by the company on 04 February 2013 at a total cost of £7,799
- debtors of £81,972 shown in the accounts to 30 November 2012, for which no receipts could be traced through the company bank account, but who were not listed as debtors in the Statement of Affairs completed by me
Verify, in the absence of any receipts or other supporting documentation, that expenditure totalling £358,837 as shown by PV Solar Fit’s bank statements between 01 December 2012 and 03 October 2013, was incurred for the benefit of PV Solar Fit’s trade.
Verify the company’s turnover between 01 December 2012 and 03 October 2013, and whether the total bank receipts of £443,956 between 01 December 2012 represented PV Solar Fit’s total income.
Verify the debt, stated as being £150,000 in the Statement of Affairs that was owed to a company of whom the other de jure director of PV Solar Fit was a director.
Establish whether the transactions entered into between 01 December 2012 and 03 October 2013 with an associated company of which I had been a director since 08 September 2012, had resulted in this company being a debtor of PV Solar Fit as at 03 October 2013, given that:
- the associated company was disclosed as a debtor in PV Solar Fit’s accounts for the year ended 30 November 2012 in the sum of £573,106
- a payment of £235,000 had been made to the associated company by PV Solar Fit on 05 December 2012
- the associated company was not listed as a realisable debtor in the Statement of Affairs as at 03 October 2013.
Establish the position with regards to my director’s loan account and whether there was a balance outstanding to PV Solar Fit as at 03 October 2013, the date of Liquidation, given that:
- accounts prepared to 30 November 2012 recorded me as a debtor of PV Solar Fit in the sum of £89,733
- PV Solar Fit’s bank statements and payroll records show that I had received monies from PV Solar Fit totalling 71431 in excess of my net salary between 06 December 2012 and 03 October 2013
- I was not disclosed as being a realisable debtor in the Statement of Affairs for PV Solar Fit as at 03 October 2013.
That between 30 May 2013 and 04 July 2013 I caused PV Solar Fit, whilst insolvent, to enter into transactions which were for the benefit of a party connected with me in the sum of £122,300, and to the detriment of creditors generally, in particular the majority trade creditor who is owed £610,642, by reference to the following matters:
- in the course of finalising the accounts for the accounting period ended 30 November 2012, I had become aware that PV Solar Fit had received erroneous overpayments from a major trade customer totalling £325,080. These accounts were approved by me on 04 April 2013
- the trade customer had sent a letter to PV Solar Fit on 22 May 2013 advising them that they had made payments to PV Solar Fit which, according to their records, had amounted to £164,915
- the balance on PV Solar Fit’s bank account on 29 May 2013 was £62,781 in credit. On 30 May 2013, PV Solar Fit made a payment of £50,000 to a party connected with me
- on 17 June 2013, the trade customer sent a further letter to PV Solar Fit advising them that the monies overpaid and repayable to them by PV Solar Fit had amounted to £579,883
- as at 03 July 2013 the balance on PV Solar Fit’s bank account was £61,685 in credit. On 04 July 2013, PV Solar Fit received monies into its bank account totaling £54,800 and made to further payments totalling £72,300 to the party connected with me
- no repayments were made to the trade customer by PV Solar Fit prior to 03 October 2013, the date of Liquidation, by which time the total net overpayments had been established as being £610,641.
A disqualification order 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.
Disqualification undertakings are the administrative equivalent of a disqualification order but do not involve court proceedings. 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.
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Published: 15 December 2015
From: The Insolvency Service