Belfast Telegraph

Toxic firms leave £80m debt bill - 102 directors banned in 18 months in Northern Ireland

By Adrian Rutherford

Almost £80m of debt has been accumulated by mismanaged companies that failed across Northern Ireland.

More than 100 directors have been handed boardroom bans in the last 18 months after their companies accumulated huge debts.

In a third of cases they were responsible for debts in excess of £1m.

It has meant a spectacular fall from grace for some of Ulster’s top business people. Among them is one family from Co Tyrone who went bust owing millions.

Samuel and Lorna Moore and their son Stephen were banned from acting as company directors for 10 years after their building firm, SH Moore & Sons Limited, went bust in 2009 leaving creditors £5m out of pocket.

It later emerged the three had enjoyed a millionaire lifestyle, splashing the cash on luxuries including a helicopter and a rally car.

Yet they are just one of an increasing number of cases where directors are being disqualified because of poor business practices.

A disqualification order is made by the High Court under the Company Directors Disqualification (Northern Ireland) Order 2002.

According to the Department of Enterprise, proceedings are brought against directors of failed companies who have “abused the privilege of limited liability status through negligence, incompetence or lack of commercial probity”.

A disqualification prevents an individual being named as a director or even acting as a director of a limited company — effectively banning them from holding any senior influential position in a company.

They can be disqualified for between two and 15 years.

Proceedings are taken under civil law, but a criminal court may also decide to make a disqualification order after conviction for certain criminal offences.

Examples of conduct which may lead to disqualification include a failure to keep proper accounting records and failure to submit tax returns.

Contravention of a disqualification order or agreement is a serious criminal offence and usually leads to imprisonment.

An investigation by the Belfast Telegraph has found 39 directors were disqualified between April and September this year.

Companies they were involved with went bust with debts totalling £39,208,271. In the previous 12 months, another 63 bosses were handed bans.

Their companies owed a further £39,284,312.

At the current rate, the number of director disqualifications this year will well exceed the total for 2011/12.

According to economist John Simpson, many of them were risk takers who gambled too much — and lost everything. “Being disqualified as a director is a significant penalty. Effectively, it’s a stain on your record,” he said.

“But while we chastise these people to prevent them from setting a bad example, on the other hand they are risk-takers.

“We keep being told that the American model is to encourage people to start again if and when they fail.”

Our investigation was based on dozens of news releases issued by the Department of Enterprise, Trade and Investment since April 2011.

The losses incurred by the failed directors varied widely, from £50,351 to companies which went bust owing millions of pounds.

The biggest loss was racked up by CRF Developments, a commercial property company on the north coast, which went into administration with debts totalling almost £12.4m.

Colin Richard Fletcher, from Ballymacrea Road in Portrush, one of two directors at the helm of the firm, was later banned for nine years.

Mr Fletcher accepted several instances of misconduct as a director, including abusing the directors' loan account by allowing it to lend more than the statutory limit.

He also accepted that he had wrongly used company funds of nearly £660,000 to buy properties in Portugal and Spain.

The next highest loss involved Mark McCaffrey, who was director of Fermanagh firm Tenderlean Meats, which went into administration two years ago with debts of £6.9m.

Mr McCaffrey, who was from Ballyconnell Road in Derrylin, was later handed an eight-year boardroom ban.

A spokesman for the Department of Enterprise said the figures for disqualifications and deficits will include some orders made before the beginning of the respective periods.

Cast Studies

Firm with 210 bounced cheques

Debt: £6,951,000

Disqualification: |8 years

MARK McCaffrey incurred an eight-year ban after his Fermanagh firm, Tenderlean Meats, went into administration with debts of £6.9m.

The wholesale and retail butchers was based in Derrylin and had a shop in Enniskillen

It was operated by Mr McCaffrey, from Ballyconnell Road in Derrylin.

The Department of Enterprise accepted the disqualification undertaking from Mr McCaffrey based on his unfit conduct.

The 38-year-old accepted he had falsified accounting records and caused the company to retain £874,760 in tax and national insurance contributions.

He also accepted misusing a Northern Bank account which led to 163 cheques worth £296,727 bouncing, and misusing a National Irish Bank account which caused 47 cheques worth €224,992 to bounce.

Mr McCaffrey also failed to file accounts on time for the 2005/06 and 2006/07 years, and did not file accounts at all in 2008/09.



Company funds were used to buy property in Spain and Portugal

Debt: £12,369,437

Disqualification: |9 years

COLIN Richard Fletcher, the director of a commercial property company on the north coast, received a boardroom ban of nine years.

Mr Fletcher was one of two directors at the helm of CRF Developments which went into administration in March 2010 owing £12.4m. He accepted a number of instances of misconduct as a director, including abusing the directors’ loan account by allowing it to lend more than the statutory limit.

He also accepted that he had wrongly used company funds of nearly £660,000 to buy properties in Portugal and Spain.

Mr Fletcher, from Ballymacrea Road in Portrush, was also late in filing the company’s annual return in 2004 and did not file 2005's annual return at all. He was declared bankrupt in September 2011 after a creditor’s petition.

Tax and insurance left unpaid

Debt: £4,531,392

Disqualification: |8 years

TWO Co Down directors were disqualified for eight years over their conduct as directors of Tinnelly International Transport Ltd.

They were Kevin Martin Tinnelly (47) and Cathrina Rose Tinnelly (49), from Kilbroney Road, Rostrevor.

The bulk freight transport company entered administration in February 2009, and went into liquidation two years later with an estimated total loss of £4.5m.

Charges of unfit conduct proven against the pair included their company’s failure to pay £60,208 of insurance due to a third party following lost cargo.

They also failed to pay £568,438 in tax and national insurance and did not return annual accounts in 2007.

A court ruled the allegations were proven. The judge said it was a serious case in which the directors had “demonstrated a lack of probity, particularly with regard to the issue of failing to pay over insurance monies properly due to a third party”.

Misappropriation and reckless use of cash from his business

Debt: £6,203,806

Disqualification: |9 years

CORMAC Green was banned after his convenience store business went into administration in 2009 with debts of £6.2m.

The 43-year-old, from Boghead Bridge Road, Aghalee, near Craigavon, was disqualified in respect of his conduct as director of Kiltagh Limited, which operated stores from premises at Ardoyne, Crumlin, Glenavy and Shaw’s Road, Belfast. Mr Green admitted misappropriating company money and “recklessly” using £150,000 of company funds to the detriment of creditors when he knew or ought to have known that the firm was insolvent.

He also withdrew — or authorised the withdrawal — of funds from the company during administration without the authority of the administrator. His company also failed to pay £254,783 in tax and national insurance for the years 2008/09 and 2009/10.



Why the courts will disqualify a director

QWhat is a director’s|disqualification?

AIt is the process whereby a person is disqualified for a specified period from becoming a director of a company, or taking part in the promotion, formation or management of a company without leave of the court. A disqualification order is made by the High Court under the Company Directors Disqualification (Northern Ireland) Order 2002. The order applies not only to a person who has been formally appointed as a director but also to shadow directors, and those who have carried out the functions of a director.

QWhen can disqualification occur?

AWhen a company has failed, the Official Receiver (or Insolvency Practitioner in a creditors’ voluntary liquidation, an administrative receivership or an administration) sends the Department of Enterprise a report on the conduct of all directors who were in office in the last three years of trading. The department will decide whether it is in the public interest to seek a disqualification order. Any application is heard and decided by the Court.

QWhy might a director be |disqualified?

AExamples include continuing to trade to the detriment of creditors at a time when the company was insolvent; failing to keep proper accounting records; failing to prepare and file accounts or make returns to the Companies Registry and failing to submit tax returns.

Q What happens after an |application for disqualification is made?

A The department files its application in the High Court supported by one or more affidavits containing evidence of unfit conduct of the directors. The directors will have the opportunity to give the court explanations or reasons for their actions. The High Court will then decide whether the conduct makes the directors unfit to act in the management of a company and, if so, how long they should be disqualified for.

QWhat happens if a disqualified director contravenes the order or undertaking?

AThey are committing a criminal offence and could go to prison for up to two years and face a fine. They could also become personally liable for any debts of the company which it incurs. Anybody who acts on their instructions may also be personally liable.

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