Mr Gary Carcary of Glasgow, has been disqualified as a director for a period of five years for breaching his fiduciary duty to the company by causing the company to undertake accounting transactions that benefited him, thereby reducing the balance he owed to the company on his overdrawn Directors Loan Account (DLA) to nil.
This action resulted in an additional liability of £267,126 to HMRC, at a time when the company had ceased trading.
Mr Carcary (58) was the sole director of BAUR (Scotland) Ltd, a plumbing and heating company, of Glasgow, from 21 July 2011 until it went into liquidation on 4 July 2014 with an estimated deficiency of £38,885.
According to professionally prepared and signed accounts for the year ended 31 March 2012, Mr Carcary’s DLA had an overdrawn balance of £104,735. Despite this, Mr Carcary continued to draw funds from the company through his DLA. At 31 March 2013, when the company ceased trading, the DLA had an overdrawn balance of £273,747, an increase of £271,031 over the whole period.
The company’s accountants stated Mr Carcary had advised them it was not his intention to repay this money and that he intended it to be his remuneration from the company and not a debt. Mr Carcary was advised that this would create a sizeable PAYE and National Insurance liability payable by the company. The accountant declared a net bonus of £225,702 to clear the DLA which created a PAYE and National Insurance liability to HMRC payable by the company of £267,126.
As a result of these transactions the company’s financial position became significantly worse and the company had no reasonable prospect of being able to pay the additional liability as it had ceased to trade.
Mr Carcary gave an undertaking to the Insolvency Service not to act as a director or be involved in the management of a limited company from 19 February.
Commenting on the disqualification, Robert Clarke, Head of Company Investigation at the Insolvency Service said:
Directors who put their own personal financial interests above those of creditors damage confidence in doing business and are corrosive to the health of the local economy.
This ban should serve as a warning to other directors tempted to help themselves first; you have a duty to your creditors and if you neglect this duty you could be investigated by the Insolvency Service and removed from the business environment.
The undertaking signed by Mr Carcary sends a clear message to other company directors that if they run a business in a way that is detrimental to either its customers or its creditors, they will be investigated by the Insolvency Service and as a result removed from the business environment.
Notes to Editors
BAUR (Scotland) Limited (SC280977) went into compulsory liquidation on 4 July 2014 with a deficiency to creditors of £38,885, which subsequently increased to £52,593. The company operated as a “Plumbing and Heating supplier”, latterly from the director’s home address.
Gary Carcary is from Glasgow and his date of birth is 7 November 1958.
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 are available.
The Insolvency Service (in Scotland) 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 and advises ministers and other government departments on insolvency law and practice. It may also use powers under the Companies Act to conduct confidential fact-finding investigations into the activities of live limited companies.
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: 10 February 2016
From: The Insolvency Service