Pound Shop Directors pay high price for lack of Accounting Records
A lack of financial records is amongst the most common grounds for director disqualification, however, rarely comes with a disqualification period of 10 years.
A Court decision in Stockport in the last week has resulted in 2 directors of a retail business operating in Stockport, Manchester, Liverpool and Warrington being disqualified from acting as company directors for 10 years each, for failing to ensure the company preserved or delivered up adequate accounting records.
An investigation by the insolvency Service found that the directors entered into a transaction on 25 January 2012, the date the company stopped trading, which transferred the assets (mainly stock, some of which was subject to retention of title), to a company owned by the wife of one of the directors as repayment of a debt stated by the directors to have been owed to a connected company. No evidence of this debt was ever produced. As a result of this transfer, these assets were not made available to the creditors nor could the holders of the retention of title recover their goods.
Commenting on the case, the Insolvency Service added: “Directors have a duty to ensure that their companies maintain proper accounting records, and following insolvency, deliver them to the office-holder in the interests of fairness and transparency. Without a full account of transactions it is impossible to determine whether a director has discharged his duties properly, or is using a lack of documentation as a cloak for impropriety”.