Misconduct in A Widing Up Heading

Case Study

Evan Wright has been instructed by a company director arrested at an airport on their way out of the UK. The Department for Business Innovation and Skills prosecute the case and it is alleged that the director dishonestly assisted another director of a parallel company in diverting funds of over £100,000 due to the liquidator during the course of winding up the company. This amounts to an offence contrary to S206 of the Insolvency Act 1986 and the penalties under this provision range from a fine to a maximum of 7 years imprisonment. Evan made a bail application and the client was released with conditions to remain within the UK. Evan is now instructed to apply for a variation of the bail conditions to permit residence abroad pending trial.

When a company is ordered to be wound up by the court, or passes a resolution for voluntary winding up, any person, being a past or present officer of the company, is deemed to have committed an offence if, within the 12 months immediately preceding the commencement of the winding up, he has—

(a)    concealed any part of the company’s property to the value of £500 or more, or concealed any debt due to or from the company, or

(b)  fraudulently removed any part of the company’s property to the value of £500 or more, or

(c)  concealed, destroyed, mutilated or falsified any book or paper affecting or relating to the company’s property or affairs, or

(d)   made any false entry in any book or paper affecting or relating to the company’s property or affairs, or

(e)   fraudulently parted with, altered or made any omission in any document affecting or relating to the company’s property or affairs, or

(f)     pawned, pledged or disposed of any property of the company which has been obtained on credit and has not been paid for (unless the pawning, pledging or disposal was in the ordinary way of the company’s business).

It is a defence to some elements of the section for a person charged to prove that he had no intent to defraud, and in respect of other elements to prove that he had no intent to conceal the state of affairs of the company or to defeat the law. It is particularly important to note that where a person pawns, pledges or disposes of any property in circumstances which amount to an offence under subsection (1)(f), every person who takes in pawn or pledge, or otherwise receives, the property knowing it to be pawned, pledged or disposed of in such circumstances, is guilty of an offence. The precise conduct of the relevant officer (which includes a shadow director) is therefore crucial in demonstrating their intent and level of knowledge. This is particularly important where someone has not yet been charged. Expert legal advice prior to interview and charge almost always gives the director an advantage when defending this type of allegation.

JMW offer free initial consultations so that clients can understand the position they are in and we often act with the benefit of Insurance funding offered through JMW Protect.

 

 

Read more

.

Wildcard SSL Certificates