Directors Banned for Accepting Orders They Couldn’t Fulfill

A husband-and-wife team has recently been banned from acting as company directors after their furniture company continued to accept orders they knew couldn’t be fulfilled. This case highlights the importance of adhering to company law and the serious consequences for directors who breach their duties.

The Case of DWH Trading Ltd

George and Williamina Hay were directors of DWH Trading Ltd, a company that sold adjustable beds and chairs, primarily to elderly and vulnerable customers. The company faced severe financial difficulties by April 2023, with a bank balance of less than £6,000 and 13 outstanding orders worth £27,250.

Despite knowing the company was financially unstable and unable to fulfill customer orders, George and Williamina Hay continued to accept new orders over the following six months. In total, they took 55 additional orders, 42 of which were not placed with suppliers, leading to a substantial debt owed to customers and creditors.

Director Disqualifications for Mismanagement

As a result of their actions, both George and Williamina Hay were disqualified as company directors for seven years. This disqualification will last until March 2032. The Insolvency Service concluded that the directors had fallen significantly short of the expected standards for company directors. The ongoing acceptance of orders despite the company’s insolvency is a clear breach of their legal responsibilities.

Legal Implications: Wrongful Trading and Misfeasance

The actions of George and Williamina Hay could be classified as wrongful trading, which occurs when directors continue to run a company in a financially unsound manner when they know the company is unlikely to be able to meet its obligations. In addition, their actions may also lead to misfeasance claims, where directors are held accountable for their misconduct or failure to fulfill their duties, causing harm to creditors and other stakeholders.

How We Can Help

If you are a company director facing potential claims for wrongful trading, director disqualification, or misfeasance, it’s crucial to seek expert legal advice. We can provide guidance and support in navigating these serious matters.

At Machins we specialise in insolvency related matters including:

• Wrongful Trading: Understanding your responsibilities as a director and mitigating risks associated with trading while insolvent.
• Company Director Disqualifications: Advising on the legal consequences of disqualification and defending your rights.
• Misfeasance Actions: Helping you address any potential claims of misfeasance and ensuring that your interests are protected.

If you’re facing any of these issues, contact us today for professional legal advice and support.