Directors banned for failing to meet their legal obligations

Two directors of an insolvency company have been disqualified for 10 years for failing to meet their legal obligations and failing to run their business in a competent manner.

Lee Anthony Pitchford and Jason Pollard were directors of Baker Donald Ltd based in Chesterfield. The company started out as a hairdressing business but later developed into an insolvency practice and a debt collection service.

On 11 February 2014, the Secretary of State for Business, Innovation & Skills, issued a public interest winding up petition against the company on the grounds that it was issuing misleading marketing letters, failing to properly deal with money received and failing to maintain accurate records.

An investigation by the Insolvency Service found that:

• Mr Pitchford and Mr Pollard failed to ensure that Baker Donald Limited operated with commercial probity or in a competent manner.

• in at least 7 cases dating from before Baker Donald traded as a licensed insolvency practice, there were inadequate records to explain, support or justify significant fees charged and work asserted to be undertaken. The inadequate documentation included the lack of a written agreement or evidence of agreed terms relating to the collection of book debt proceeds on behalf of at least 5 clients.

• Baker Donald did not properly and appropriately deal with the sums of money it had received through its trading practices. It failed, either deliberately or through its poor record keeping, to properly segregate money due to clients, third parties and itself.

• Baker Donald did not transparently describe and disclose the work it would perform nor declare the actual work performed and the true extent of fees charged. There was a lack of transparency in disclosures to creditors within the proposals and statement of affairs as to the actual work performed by Baker Donald and the true extent of fees charged.

• on at least eight files reviewed during the investigation, there were signed terms of engagement with the relevant directors of the client companies. Within these documents there is no reference to the actual work to be undertaken and the agreed remuneration rate for any work undertaken.

Cheryl Lambert, Chief Investigator at the Insolvency Service, said: “Directors have a duty to ensure that they act competently and with commercial probity. Directors who do not comply with this basic obligation can expect to be investigated by the Insolvency Service and enforcement action taken to remove them from the market place.”

Please contact Neil Cuffe 0208 290 7405 or email ncuffe@judge-priestley.co.uk if you would like more information about the issues raised in this article or any aspect of company law.

The views expressed in this article are those of the article contributors, for which Judge & Priestley LLP accepts no responsibility. Readers should take appropriate legal advice before acting on any issues raised.