James McErlean (55) of Mullinahoe Road, Ardboe, Dungannon was disqualified for six years on 4 November 2021, in the High Court, Belfast in respect of his conduct as a director of Lough Neagh Limited.
The Company operated in the business of buildings completion and finishing and went into liquidation on 6 July 2017 with an estimated deficiency as regards creditors of £302,931. There was a total of £2 owing as Share Capital, resulting in an estimated deficiency as regards members of £302,933.
The matters of unfit conduct alleged by the Department in relation to James McErlean in respect of his conduct as a director of the Company and accepted by the Court were:
- Causing and permitting the Company to operate a policy of discrimination against the Crown from 2014/15. Causing and permitting the Company to retain a total of £263,248.52 due to the Crown as at the date of liquidation. This represented 68% of the Company’s overall revised estimated deficiency in respect of PAYE / NIC and VAT properly payable to the Crown. Furthermore, operating a policy of discrimination in that significant payments were made to trade creditors and third parties at a time when the HMRC debt continued to increase;
- causing and permitting the Company to fail to comply with the legislation in that annual accounts for the year ended 30 June 2015 were not filed within the prescribed period;
- causing and permitting the Company to fail to comply with the Companies Act 2006 in that the Annual Returns for the period ended 09 June 2012 and 09 June 2015 were not filed within the prescribed period and the confirmation statement for the period ended 09 June 2017 was not filed at all;
The Court has made five Disqualification Orders in the financial year commencing 1 April 2021.
Notes to editors:
- Insolvency Practitioners acting as voluntary liquidators, administrative receivers and administrators have a duty to report unfit conduct to the Insolvency Service within the Department for the Economy.
- The aim of the Department is to bring disqualification proceedings against those directors of failed companies who have abused the privilege of limited liability status through negligence, incompetence or lack of commercial probity. The legislation contained in the Company Directors Disqualification (Northern Ireland) Order 2002 (“the 2002 Order”) is for the protection of the public and trading community but its operation should not inhibit genuine enterprise.
- In cases where a person is subject to either a Disqualification Order made by the Court or a Disqualification Undertaking accepted by the Department, that person shall not be a director of a company, act as a receiver of a company's property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless he has the leave of the High Court. A disqualified person cannot obtain permission to act as an Insolvency Practitioner.
- Article 9 of the 2002 Order provides that where a director is found to be unfit he must be disqualified for a minimum period of two years, up to a maximum of fifteen years. The Courts have decided that the level of seriousness of unfit conduct can fall into three brackets with the top bracket of periods over ten years reserved for particularly serious cases, six to ten years reserved for cases which do not merit the top bracket and two to five years for cases where, although disqualification is mandatory, the case is less serious.
- The 2002 Order also allows directors, with the agreement of the Department, to avoid the need for a court hearing by offering an acceptable Disqualification Undertaking. This has exactly the same legal effect as a Disqualification Order made by the court, and will usually include a schedule identifying the director’s unfit conduct. The consequences of breaching a Disqualification Undertaking are the same as those for breaching a Disqualification Order.
- If anybody contravenes a Disqualification Order or breaches their Disqualification Undertaking they may be committing a criminal offence and could go to prison for up to two years or face a fine or both. Any person with information to suggest that a disqualified person has acted in contravention of this provision should contact The Insolvency Service’s Directors Disqualification Unit on 028 90 548582.
- The period of disqualification commences at the end of 21 days beginning with the day the Disqualification Undertaking was accepted by the Department.
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