Directors disqualified over misleading accounts and VAT returns

Two directors have been disqualified after a court heard how they tried to “buy time” for their ailing company by producing misleading accounts and VAT figures.

The directors were sole shareholders in a company importing and supplying plywood and sheet materials. At first their company was successful but it suffered a downturn in 2009 and ceased trading in 2011.

It then became apparent that the directors had produced dishonest accounts for 2009 and 2010. The accounts gave the impression that the company was owed money by other businesses belonging to the directors when in fact it was not. The directors had also submitted false VAT accounts, understating the amount due.

The court held that the directors had deliberately set out to mislead and give the impression that the company was due to receive substantial sums. The targets of the misleading accounts included HMRC and potential suppliers with whom credit terms were sought.

The court accepted that the directors’ intention was that the company would pay all the money due in the longer term. The under-declarations were a way of buying time that would not otherwise have been available to the company.

However, in the circumstances, the directors’ conduct in respect of the false VAT returns and misleading accounts made them unfit to be concerned in the management of a company.

Please contact Sing Li if you would like more information about the issues raised in this article or any aspect of company law.