Director banned for breaking bankruptcy rules

Michael Richardson, the sole director of cement supplier Speedy Mortar Limited, has been disqualified as a company director for nine years by Carlisle County Court, for running a company whilst being bankrupt and diverting money from creditors.

The disqualification, from 7 June 2013, prevents Richardson from directly or indirectly becoming involved in the promotion, formation or management of a company for the duration of his ban, unless given leave by the court.

Richardson was made bankrupt on 16 July 2010, and should have resigned from any directorships on that date as required in bankruptcy law. However, he still continued as a director at SML, a role he had taken up on 4 November 2003.

In addition, on 17 and 20 December 2010 under his stewardship, SML paid £27,500 to a former director of the company despite Richardson knowing the company was unable to settle a debt of £205,566, and was insolvent.

Richardson claimed to have first become aware that SML was insolvent in December 2010. However, the court heard that in November 2010, he was advised by his accountants that liquidation was appropriate. He had also been warned of the implications of his bankruptcy and the consequence of any inappropriate transactions made prior to liquidation.

When SML went into liquidation, there were assets of £6,205 and liabilities of £120,292, leaving a total debt of £114,087.

The disqualifications followed an investigation by the Insolvency Service. David Brooks, head of company investigations at the Insolvency Service, said: "A bankrupt is made fully aware that he is not allowed to be a company director. In this case Mr Richardson failed to abide by this restriction going on to take decisions as a director that harmed creditors.

"A bankrupt who act as a director in contravention of his obligations should not expect to do so without repercussions, particularly when others suffer financial loss as a result. The Insolvency Service will investigate and remove such people from the business environment."

A disqualification order was made on 17 May 2013 in Carlisle County Court against Michael Richardson (effective from 7 June 2013) for his conduct as a director of Speedy Mortar Limited.

Speedy Mortar Limited, Company Number 04953003, went into liquidation on 10 February 2011 with assets of £6,205, liabilities of £120,292 and a total deficiency of £114,087. It manufactured and supplied cement from Sandy Sike Industrial Estate, Longtown, Cumbria,CA6 5SY.

The allegations made out in Court were that:

  • Between 16 July 2010 and 17 January 2011 Michael Richardson acted as the sole director of Speedy Mortar Limited ("SML") without the leave of the court when he was an undischarged bankrupt, in that:
  • Richardson was appointed a director of SML on 4 November 2003.
  • On 16 July 2010 a Bankruptcy Order was made against him.
  • On 26 July 2010 Richardson signed a form advising him of the restrictions on him as a bankrupt, including not being allowed to be a director or act directly or indirectly in the management of a limited company during his bankruptcy.
  • Richardson obtained no court sanction for leave to act as a director whilst bankrupt.
  • At liquidation there were assets of £6,205 and liabilities of £120,292, a deficiency of £114,087.
  • Michael Richardson caused Speedy Mortar Limited to carry out transactions to the detriment of creditors generally on 17 and 20 December 2010, in that online payments totalling £27,500 were made on those dates to a former director at a time when Richardson knew or ought to have known that SML was insolvent. In particular:
  • Accounts filed for the year to 31 December 2009, signed by Richardson in September 2010, show SML to have net liabilities of £205,566 and to be insolvent at that time.
  • Richardson states in his returned questionnaire to the liquidator that he first became aware that SML was insolvent in December 2010.
  • At a meeting with SML's accountants in November 2010, he was advised that liquidation was appropriate, and the implications of his bankruptcy and of any inappropriate transactions made prior to liquidation were explained.
  • On 17 December 2010, Richardson caused SML to make two online transfers of £10,000, each to a former director, followed by a further online payment of £7,500 to the former director on 20 December 2010 in respect of monies owing in respect of wages and a DLA credit balance.
  • On 10 February 2011 SML had outstanding liabilities to creditors of £120,292.

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; act as an insolvency practitioner; or be a receiver of a company's property.

Your Comments

Subscribe to our newsletter