You have a lot on your plate as a business owner, and keeping your accounts up to date might seem like something that can be put off till you have more time. This is unwise, even if nothing goes wrong, but there are circumstances when getting caught with your accounts undone could lead to disqualification as a Director.
The Case of Mitchell Smith
The government has recently announced the disqualification of Mitchell Smith, founder of a Dudley-based business called MJS Interiors, specialising in home renovation and refurbishment. Started in 2017, they appear to have run into serious difficulty in the lockdown and ceased trading in late 2020.
This was unfortunate, but it’s inevitable that some business will end up going into insolvency, especially during such a difficult time. As long as everything’s in order, it can be a way forward for the owners. In this case, however, everything wasn’t in order.
Mr Smith was unable to provide the Liquidators with up-to-date accounts, and a subsequent investigation by the Insolvency Service revealed income of £2,189,405 and outgoings of £2,205,375 that couldn’t be accounted for. Although it hasn’t been suggested that Mr Smith acted with any criminal intent, the upshot was that he’s now disqualified from acting as a Director for seven years.
The Consequences of Disqualification
If you’re disqualified from acting as a Director, whether by a court order or, as in Mr Smith’s case, by a voluntary undertaking, there are a number of consequences. The main ones listed on the government’s website are that you’re forbidden to:
- 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
Even if you arrange for other people to form or manage a company on your behalf, this still violates the terms of your disqualification. There are many other restrictions which may or may not apply in your particular case. Roles that could be affected include:
- charity or pension trustee
- school governor
- member of a police authority
- member of a housing association
- member of various professional associations
How to Avoid Disqualificatio
According to Dave Elliott, Chief Investigator at The Insolvency Service, “It is important for all directors to be aware of their responsibilities to the company and its creditors. Failure to maintain accounting records is a failing for which the Insolvency Service will seek serious and significant sanction.”
In practice, it can be difficult to keep give this your full attention if you’re constantly having to chase up customers who aren’t paying up — and, at the same time, this can push you closer to insolvency.
Give me a call to find out how I can help you keep the income you’re entitled to flowing in, leaving you free to make sure you’re dotting all your Is and crossing all your Ts. That way, even if you do end up insolvent, you won’t be punished for it.