Is Your Company Facing Insolvency? Seek Professional Advice Today!

If your company is facing insolvency, it is vital to keep the interests of creditors at the forefront of your mind and a failure to do so can lead to criminal sanctions. The point was underlined by one case in which a businessman who withdrew £189,000 from his company’s bank account shortly before it went into liquidation received a stiff prison sentence.factory

The man was sole director of a company that specialised in supplying manual labour to agricultural growers. Its bank account had been frozen by court order as part of a criminal investigation and it ceased trading less than a month later. However, when the freezing order expired, the man took the opportunity to remove large sums of money from the company’s bank account. When it was placed in liquidation a few months later, there was less than £1,000 left in its account.

After his wrongdoing emerged, the man pleaded guilty to two offences contrary to the Insolvency Act 1986 and one contrary to the Companies Act 2006. He admitted having fraudulently removed the money in anticipation of the company’s insolvency. He had also failed to ensure that the company kept proper accounts and to disclose the full extent of its assets to the liquidator. He received a 32-month jail term.

In challenging the sentence before the Court of Appeal, his lawyers said that he was a family man who had worked hard all his life and that the investigation that led to the freezing order being made had come to nothing. The company’s insolvency was said to have arisen as a result of state intervention, rather than any fault on his part. In dismissing the appeal, however, the Court noted that he had removed all of the money for his own benefit. In the circumstances, it was simply not arguable that the sentence fell outside the appropriate range.