No crying for Chappell
Failure to do so may result not only in the loss of your business but also your ability to be a director in the future with potential disqualification as a sanction.
But even if that happened, you’d still have to do something pretty bad to be described by a judge as “the serial bankrupt whose brief ownership of the department store chain has cast him into the annals of corporate villainy”.
That’s what happened to Dominic Chappell, former owner of British Home Stores (BHS) this week as The Insolvency Service brought its case against him for his stewardship and subsequent decisions following the collapse.
Chappell bought BHS for £1 from Sir Philip Green’s Arcadia group in 2015. It collapsed a year later with the loss of 11,000 jobs and a pension fund deficit of £571m.
The court found that Dominic Chappell failed to comply with obligations regarding BHS’ pensions liabilities at the time it collapsed. Sir Philip eventually reached a deal with The Pensions Regulator to compensate the fund with £363m.
Following the Insolvency Service investigation, a court has banned Chappell from holding any company directorships for 10 years.
The court found that Chappell wrongfully diverted £1.5m of funds from BHS Limited to a company based in Sweden the day after the possibility of an administrator being appointed to the business had been discussed with its board.
He also transferred over £1m to Retail Acquisitions Limited, a company he was a director of and a 90% shareholder of at the time. The court said that those funds should have been retained by BHS and its property arms as proceeds from property sales in London and Sunderland.
While director of Retail Acquisitions, Chappell was also found to have failed to maintain, preserve or deliver adequate accounts records to The Insolvency Service which led to investigators being unable to verify the shares Chappell’s company bought in a Portugese property company.
The inadequate records kept by Chappell meant investigators were unable to explain or verify the circumstances under which he caused Retail Acquisitions to borrow £500,000 without the knowledge of his co-directors.
Chappell bought a US company with £275,000 of the Retail Acquisitions loan, with the remaining £221,960 balance used to pay another company where his father, Joseph Chappell, acted as a de facto director.
Joseph Chappell was also banned from holding any directorships for five years.
Claire Entwistle, Assistant director of the Insolvency Service said: “Both Chappell and his father abused their responsibilities as directors. Not only did they carry out reckless financial transactions but they failed to maintain adequate company records – a basic requirement for any responsible director.
“The courts have recognised the severity of their actions and the bans handed down will seriously curtail their opportunities to manage companies.”
As professional Insolvency practitioners, one of our duties in a liquidation is to investigate the conduct of company directors leading up to this event.
Companies can fail for any number of reasons but if there is evidence of wrongdoing or unfit conduct then it must be reported to The Insolvency Service.
If you have any questions or worries about your responsibilities as a director or to shareholders or others then contact us.
A free initial consultation with a member of our expert team of advisors will give you a clearer picture on the tasks and duties you need to perform so you’ll be able to talk to any authorities without worrying about whether you’ve been accurate and honest.