Liquidated company at centre of investigation after failing to provide accounting records
In April 2017, a property developing business was placed into creditors’ voluntary liquidation with an estimated liability of more than £416,000.
But after failing to provide adequate accounting records to insolvency practitioners, an investigation was launched into the business.
The Insolvency Service, leading the investigation, found that from “at least” June 2016 to February 2017, accounting records could not be located to show the true nature of the company’s business or verify the course of events which led to its liquidation.
According to the report, this meant it was “impossible” to account for various payments out of the business, explain the source of credits to the company’s bank account, as well as remuneration and what tax should have been paid.
Questions were raised over why there had been more than £407,000 worth of expenditure from the company’s bank account and whether this related to genuine company expenses.
Other examples include the unknown whereabouts of around £141,000 generated from the sale of 20 building plots.
Importantly, investigators could not conclude how the company came to be in financial distress, meaning the company could not present a reasonable argument to creditors.
Instead, its company director was banned from acting a director for a period of eight years for his shortcomings in failing to provide proper accounts.
Dave Elliott, Head of Insolvent Investigations (Midlands & West) for the Insolvency Service said: “Directors have a duty to ensure that companies maintain proper accounting records, and, following insolvency, deliver them to the office-holder.
“Without such records, it is not possible to determine whether or not a director has discharged his duties properly, or is using a lack of documentation as a cloak for other wrongdoing.”
If your business is in financial distress, our advice is to act fast. The sooner you seek professional advice, the smoother the outcome and the easier it is to avoid complex investigations.