Directors disqualified for 16 years for breaching directors disqualification restrictions

It seems strange that someone can act as a director of a company whilst disqualified however, that is precisely what Martin Muldowney did and the consequences for him and Mr Roger John Hallas were severe.

Mr Muldowney and Mr Hallas were directors of Oldham-based CFS Furniture Ltd (“CFS”), which went into liquidation in January 2012, owing more than £1m to creditors.  They have been disqualified for a total of 16 years; Mr Muldowney, for acting as a director while an undischarged bankrupt and Mr Hallas for allowing him to do so.

The disqualifications follow an investigation by the Insolvency Service.

The Secretary of State for Business, Innovation & Skills has accepted undertakings from both men, banning them from acting as a company director or from managing or in any way controlling a company for the duration of their bans:

  • Mr Muldowney, of Littleborogh, Oldham, for 11 years from 24 April until 2025, and.
  • Mr Hallas, 63, from Disley, for five years from 11 December 2013

Commenting on the disqualifications, Robert Clarke, Head of Insolvent Investigations North at the Insolvency Service, said:

“The bankruptcy restrictions provided for by legislation are there to protect the public and ensure that trading partners can deal confidently with the registered directors of a company. Those who knowingly breach such provisions do so at significant risk and will be rigorously pursued by the Insolvency Service.

“In this particular case, not only did the directors of CFS act in a less than transparent manner, but their actions caused considerable losses to be suffered by a trade partner who, after already paying for orders, had to refund their customers for purchases which were never delivered. Those losses, and the losses of other parties, were then compounded by the unfair distribution of the company’s cash and other assets, favouring a connected company in a manner entirely unacceptable.

“Mr Muldowney and Mr Hallas have paid the price for their conduct, and cannot now carry on in business other than at their own risk for lengthy periods of time.”

Investigators found that Mr Muldowney, 49, who formally resigned as a director of CFS on 2 February 2011 after being made bankrupt, breached the restrictions placed on him by continuing to act as a director of the company between May 2011 and January 2012.

In addition to breaching the terms of his bankruptcy, Mr Muldowney did not dispute that CFS received payments totalling £162,752 to which it was not entitled from a ‘daily deals’ website company and also transferred cash and assets totalling more than £150,000 to a supplier company of which his wife was the sole director when other creditors went unpaid.

This case shows that when bankrupt you cannot act in the capacity of managing a company, nor should any director act on the instructions of anyone who is disqualified.  The consequences are severe and could also carry with it a custodial sentence however this was not the case here, possibly because both gave undertakings.

We have acted for creditors in the past where this has happened and recovered over 90p/£ of the company debt.  If you are made bankrupt and you are involved in a company in financial difficulty, do not continue acting in the management of a company or getting someone to do it on your behalf, immediately contact us for help.

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