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The Corporate Veil Never Protects Against Wrongdoing

The corporate veil protects company directors against the consequences of bad luck or even poor judgment – but never wrongdoing. In one case, a man who made false statements to finance companies as his business foundered has been disqualified from acting as a company director for seven years.

The man was managing director of a property company which went into liquidation owing more than £50 million. He faced claims that, prior to the company’s demise, he made false representations to a number of finance companies in respect of the purported hire purchase of large amounts of CCTV and fire security equipment.

Discrepancies were uncovered between the amount of equipment which was said to have been delivered and installed and the amount actually in situ. The man denied that he had been dishonest and explained that much of the missing equipment had been stolen, vandalised or otherwise damaged before removal.

At the behest of the Secretary of State for Business, Innovation and Skills, a judge nevertheless ruled that he was unfit to be a director. In rejecting his appeal against that ruling, the High Court found that the judge was entitled to conclude that the probable explanation for at least part of the discrepancies was that much of the equipment had never been delivered in the first place.