Five More Directors Banned in Ongoing Crackdown

Five restaurant directors from Yeovil, Cardiff and Newport are the latest persons to be banned from running companies for knowingly hiring illegal workers, following investigations into three restaurants by the Insolvency Service.

Abdul Boshor and Samiur Rahman , who operated the Empire Restaurant (Cardiff) Ltd, signed agreements that ban them from serving as directors for seven and six years respectively. Abdul Kayum (46) and Rothna Begum (40), operators of the Akash Indian Restaurant in Yeovil, signed agreements for six years. Mohammed Joynal Hye, who ran the Delhi Restaurant in Newport, has agreed not to be a director of a limited company for seven years.

In the past year, the Insolvency Service, working with Home Office Immigration Enforcement, has led a campaigned that has resulted in 27 directors and two bankrupts across the country banned from running companies for a total of 194 years for hiring illegal workers. More persons are expected to appear before the courts in the next few months.

Vicky Bagnall, Director of Investigation and Enforcement, commenting on these bans at the Insolvency Service, said “These cases show that by working together government agencies are cracking down on rogue companies and banning their directors for considerable periods of time. Working illegally is not victimless – legitimate jobseekers have fewer opportunities to find work, honest competitors are undercut and tax to fund essential public services is not collected.”

Disqualification proceedings were initiated against the five directors in the latest cases after an investigation by the Insolvency Service found that during a visit by Home Office Immigration Enforcement the Akash Indian Restaurant in Yeovil was found to have hired at least one illegal worker. An investigation by HMRC also found that the company had failed to correctly implement a PAYE system for its employees between 2006 and 2013. The company later entered liquidation leaving a PAYE and NIC tax liability of £101,264, and total debts of £138,243.

Mr. Bosher and Mr. Raham knowingly employed illegal workers as waiters in violation of UK immigration rules at their Cardiff restaurant. In addition to employing illegal immigrants both directors failed to ensure that the company filed accurate VAT records between June 2012 and June 2013 leaving an estimated tax liability of £27,440.

Mr. Hye caused or permitted a company to employ illegal workers, failed to maintain, record or deliver accounting records to explain transactions, failed to make VAT returns after January 2012 and VAT payments after June 2012.

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Eco Business Management Ltd. Wound up By Unopposed Petition in the High Court

This month the Secretary of State for Business, Innovations and Skills presented a petition to wind up Eco Business Management (EBM) Ltd., following confidential enquiries by Company Investigations of the Insolvency Service. The petition to wind up the company went unopposed in the High Court.

An investigation into the accounts and dealings of EBM revealed that the company had been mis-selling carbon credits to investors using high-pressure sales techniques and false/misleading statements. EBM charged clients inflated prices of up to £11.95 per carbon credit, and some of the clients’ credits were cancelled with any prior knowledge or consent.

Investigators told the Court that EBM falsely ensured investors that they would be receiving a return of up to 82% on their investment in a timeframe of just 6 months to 2 years. EBM made investors believe that such returns were guaranteed because the company claimed it had lined up arrangements with other businesses that were supposed to buy the mis-sold carbon credits from investors at a substantial mark-up. When investors asked about the status of their investments they were told that the company had already entered into liquidation, which was a lie.

After the Court’s decision to wind up, Supervisor of Company Investigations, Chris Mayhew elaborated on the history and details of the case, saying that the investigation started with contacting a Mr. Aaron Whiteman, who was one of the people involved in registering the company back in Oct. 2011.

According to Mr. Whiteman, EBM did not start trading and didn’t have any records, bank accounts, or employees that he knew of. He supposedly “handed over” the company to a broker whose name and contact details he could not recall other than noting that he spoke to someone named Chris. After being asked what he thought could happen as a result of his actions, Mr. Whiteman responded that he “did not care (expletives)” as he was busy “doing other things.”

Eco Business Management Ltd. also filed dormant accounts during the timeframe they were actively selling overpriced carbon credits to the public, promising an exuberant short-term return-on-investment of up to 82 per cent. EBM also claimed that it was an established international company that was “covered” by the Financial Conduct Authority (FCA), although both of those claims were completely false.

EBM also made claims that it was a “leader” in the carbon finance industry, when in reality it was a small eco con that preyed on a relatively small group of investors by reducing their bank accounts rather than their carbon footprint. The investigation uncovered that a total of 22 investors had purchased more than 100,000 worth of carbon credits from the business, all while the company was still filing dormant accounts.

Mr. Mayhew went on to urge the public not to respond to ANY cold-calling investment sharks or any other kind of aggressive marketing tactics, which are often indicative of a scam. After reiterating the fact that The Insolvency Service will continue take action against rogue and dishonest companies, Mayhew then went on to give a summary of the reasons behind EBM’s winding up, which, he said, were the company’s abandonment, objectionable practices, lack of cooperation and transparency, and breaching the Companies Act of 2006.

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New Guidance on Undrawn Pension Entitlements

On Friday 27 March, the Insolvency Service released a summary on their new guidance for how DRO intermediaries and official receivers are to handle undrawn pension entitlements. This is based on a decision handed down in the Horton vs Henry case. The guidance is pending the outcome in the Court of Appeal.

Information for Debt Advice Agencies and Insolvency Practioners

The Insolvency Service presented guidelines for those who deal with providing advice to debtors in relation to how DRO Intermediaries and Official Receivers handle undrawn pension entitlements. These new guidelines are in six parts as follows:

  1. Undrawn pension funds should not be calculated in Income Payments Agreements or Income Payment Orders (IPA or IPO). Only those that were in payment at the time the bankruptcy order was made can be considered in these calculation. If the election to draw pension was made prior to the date of discharge, then all income inclusive of lump sum payments can be included.
  2. In like manner, DRO intermediaries cannot use undrawn pension funds for those debtors over 55 years of age within the income calculation.
  3. Debtors over the age of 55 with access to undrawn pensions, both intermediaries and official receivers need to ensure that the debtor has met the insolvency test at the application date and/or the debtor cannot meet his or her debts.
  4. The official receiver should consider whether or not seeking an annulment of the bankruptcy order would be appropriate. In terms of a Debt Relief Order, if the intermediary is concerned that the debt is not greater than the available fund, he or she is to contact the Debt Relief Order Team so they can decide whether or not the application should be accepted by the official receiver.
  5. Official receivers are told to continue challenging those pension scheme payments that come in to the detriment of creditors. This is of particular importance when the individual who is bankrupt has a SIPP, Self-Invested Personal Pension and when property is the main asset of the pension fund.
  6. Bankruptcy orders petitioned prior to 29 May, 2000 the bankruptcy estate’s trustee will continue with vested pension arrangements. If the official receiver is a trustee, the pensions unit within the Long Term Asset and Distribution Team will handle these cases. They will take steps to ensure that creditors realise maximum amounts in accordance with the rule changes effective 1 April, 2015.
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Government Published Response to Money Advice Service Independent Review

On March 20, 2015 government’s response to the independent review of MAS (Money Advice Service) headed by Christine Farnish. On the same day the review was published as well. The FCA, Financial Conduct Authority and MAS also gave their response to the independent review.

Christine Farnish Appointed Head of Independent Review

Government established MAS to ensure access to financial advice and education to consumers. Last year, May of 2014, Christine Farnish was appointed to lead the independent review of the Money Advice Service.

In their responses, the government, the FCA and MAS established what they will do to meet recommendations and challenges identified in the review. It is also their aim to improve how those objectives are met by MAS.

Findings of Review

In relation to debt advice, the review found that significant progress was made by MAS since 2012. Further, the recommendation of the review that MAS should continue to provide excellent quality advice on debt to consumers was well received by government. MAS is dedicated to the creation of a Debt Advice Steering Group which will back the MAS’ efforts to abide by the review’s recommendations which include giving assistance to consumers so that they can receive advice through the means that is best suited to their needs.

Government was equally pleased with commitments from the water and energy sectors to provide £1 million during the coming financial year for debt advice funded by the Money Advice Service. This is a vital step towards a more sustainable funding platform for debt advice that is more sustainable and equitable.

Recommendations Going Forward

In regards to money advice, it was recommended by the review that MAS should close market gaps to circumvent the duplication of those services already in place by other financial advice and education providers. This objective is supported by government, and also welcomed the FCA and MAS’ commitment to work together to implement many of the review’s recommendations.

The two groups are committed to working in unison to answer questions brought up by the review in terms of the Money Advice Service’s current delivery models and their focus. It is their intent to submit and publish plans of action for submission to government this coming autumn.

Government Will Review Recommendations Again in Autumn

After the recommendations are submitted, government will decide if any other changes to the advice service need to be put in place, and whether or not any changes in legislation are needed. Their findings will be published before year’s end. Potential alterations would need to be in the context of plans going forward as well as in any new developments within the financial advice and information sector. Included in their findings will be how government’s changes in pensions affected the sector.

In response to the final report of the independent review, Andrea Leadsom, Economic Secretary states that a key part of government’s long term plan is ensuring consumers have access to first-rate advice and education.

Secretary Leadsom further says that she is happy to announce that the final report and government’s response to the independent review have been published.

In her words, she is “grateful to Christine for her work in leading this review” which she states makes several recommendations that are important for improving the manner in which the Money Advice Service is run. She further welcomes the steps announced by MAS along with the group’s commitment to consider in full recommendations made by the review and their agreement to submit a prospective plan of action in the autumn.

Farnish states that the Money Advice Service needs to revamp its business model. If they follow her recommendations, consumers will better have the ability to comprehend and work through the financial services markets that are highly complex.

Rather than to compete in a market that is already over-crowded, the Money Advice service should work for consumers to strengthen the accessibility and supply of financial guidance and information. The independent review details how these benefits to consumers could be realized with greater accountability and a much reduced cost.

This challenges MAS but also provides an opportunity that is possible to achieve. Christine Farnish believes that the result will be better service to consumers.

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Coakley Banned From Acting as Company Directors for 10+ Years

On 12 Feb. 2015, the director of the insolvent company St. Vincent Street (SVS) Ltd., Thomas Coakley (age 54), signed a 7-year disqualification undertaking, which banned him from acting as a company director of any limited company until Feb. 2022.

A month earlier, on Jan. 14 2015, his son Ronald Andrew Coakley (age 28) also signed a shorter 3-and-a-half year disqualification undertaking, which banned him from acting as a director of any limited company until July 2018.

SVS Administration

SVS entered into administration on 14 Feb 2013 after trading between the months of April 2010 to February 2013. The company was originally incorporated on 2 Nov. 2009. At the time of entering into administration, SVS had a total of £21,741,506 in liabilities and possessed a total of £9,126,015 in assets, the difference between which resulted in estimated deficiency of £12,615,491 owed to creditors.

Falsified Employment Records

SVS was a property company that failed to fulfil the legal obligation to protect the deposits of tenants. Furthermore, it was found that the company paid staff in gross while stating otherwise on their employment contracts. In particular, an investigation conducted by the Insolvency Service revealed that SVS did not accurately and properly account for tax through the time it was trading.

Tax Avoidance 

An examination of the company’s employment contracts showed that SVS should have been paying employee tax according to the PAYE system, but only one of their employees was registered in the scheme. An audit of the company’s accounts showed that employees were paid in excess of £500,000 overall. Meanwhile, all deductions, declarations, and PAYE/NIC payments to HMRC totalled less than £10,000. In addition, while the directors of SVS operated directors’ loan accounts, they failed to account the corporation tax to HMRC.

Failure to Account for Tenant Deposits

The sum of the tenant deposits that SVS failed to protect totalled to £19,425, an although the company could not preserve these deposits, before ceasing to trade SVS cleared out its bank account of all funds by making payments totalling more than £26,000 to a family member.

Insolvency Service Speaks Out

Cheryl Lambert, the Head of Outsourced Investigations at The Insolvency Service, commented on the disqualification of the directors of SVS, stating that the Insolvency Service will continue to “protect the integrity of the marketplace” in situations where the directors of property companies fail to comply with their obligations protect tenant deposits and properly pay tax. In such cases, Cheryl says, directors who breach fiduciary duties “can expect the Insolvency Service to seek a ban.”

Cheryl concluded her comments saying that Thomas Coakley operated the business like it was “a personal fiefdom” and continuously put his own interests before that of his company’s creditors and tenants, as well as the common taxpayer.

Thomas Coakley’s signed undertaking was given to the Secretary of State for Business Innovation & Skills in February; his disqualification commenced on 5 Mar. 2015. His son, Ronald Coakley, gave his signed undertaking in January, but his disqualification is set to commence on 2 Apr. 2015.

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According to word coming from Clinton Cards, the company may be headed towards administration which could potentially place the jobs of more than 8,000 people at risk.

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Think Money welcomes plans for ‘simpler’ bankruptcy

Financial solutions company Think Money has welcomed new plans, announced by the Government, to ‘streamline’ the bankruptcy process – which could cut costs for both struggling borrowers and the taxpayer.

Business Minister Edward Davey has made proposals to allow struggling borrowers to apply for a bankruptcy order without going through the courts, which could help vulnerable people get the help they need with their debt problems faster.

Under the proposals, people applying for bankruptcy would be able to make an online application – or use a traditional paper application form – but would only have to attend court if there was a disagreement between them and their lenders.

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Entire MS Global US staff fired now all eyes on UK

It seems as though the debt crisis in the eurozone has far reaching tentacles that have impacted everyone from individuals to corporations to governments around the world. After bad investments in the eurozone debt crisis, MF Global filed bankruptcy and liquidators are now winding down the multinational brokerage.

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North East of England Seeing Fewer Insolvent Takeovers

At the height of the debt crisis which peaked in 2009, the North East of England saw a record number of insolvent businesses being taken over by investors. Recently R3 commissioned Experian Corpfin to research insolvent company takeovers and those still distressed. Findings show that far fewer insolvent businesses are being taken over in the North East.

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Record amounts of people were proclaimed insolvent in England and Wales during the past year.

An all-time high of 135,089 persons were announced insolvent in 2010, the Insolvency Service revealed – 0.7% up on the total for 2009.

The record had been reached in spite of a 13.6% drop year-on-year in individual insolvencies to 30,729 for the last three months of the year, as the improving economic situation began to take hold.

The figures stick to a warning that figures plunged directly into insolvency this year is only going to increase to new records as young families are struck by the Government’s austerity push.

Around 140,000 adults will probably be made bankrupt, or forced straight into another kind of personal insolvency, equal to 385 per day, said accountancy firm RSM Tenon.

Mark Sands, of RSM Tenon, stated: ‘The UK will see the highest levels of personal insolvencies on record as the Government’s austerity measures start to bite.

‘The number of victims will be enough to fill both the London 2012 Olympic stadium and the Emirates Stadium [home to Arsenal football club].’ 

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