Director's Friend

THE DIRECTOR’S FRIEND BLOG - ‘Directors assumption of personal liability’

Director's Friend

This is the next in the series of blogs for the Director’s Friend blog.

The case:

This is a discussion about a recent case decided in the Chancery Division of the High Court – Situl Devji Raithatha (as Liquidator of Halal Monitoring Committee Limited and Mir Nazeer Ahmed Baig and others a judgment by Chief Registrar Briggs.

Summary:

The company The Halal Monitoring Committee Limited (the ‘Company’) was incorporated as a community project ensuring that the meat and poultry consumed by the Muslim community was Halal.  The Company was intended to be run on a not for profit basis. The Company did not register for VAT. HMRC asked that the Company register for VAT. It did not do so. A VAT Assessment was raised and not paid. HMRC presenting a winding up petition that was not opposed by the Company. A winding up order was made on 30 April 2012.

So, were the directors of the Company liable for the failure to register for and pay VAT?

Section 212 of the Insolvency Act 1986 (the ‘Act’)

In the Director’s Friend earlier blog this section of the Act was explained. Whilst the Chief Registrar does not refer specifically to this law it is likely that the claim advanced was for Misfeasance under this section of the Act.

The pleaded issue for the Court to decide was in circumstances where HMRC had submitted a proof of debt; the Company suffered a loss as a result of the failure to register for VAT in 2005 and collect in that VAT. The Liquidators case was that as a consequence the directors acted in breach of duty of care, skill and diligence owed to the Company (and so were personally liable).

The directors admitted the failings in respect of VAT. They took issue that they had breached their duty to exercise reasonable care, skill and diligence. Amongst other technical arguments put the directors argued that they were non- specialist volunteers and were entitled to rely upon independent specialist advice. The directors also relied upon the Company accountants to advice. The latter argument was a key part of the defence.

The judgment:

At paragraph 27 the Chief Registrar proceeded on the basis that the Company should have been registered for VAT from 2005. The Registrar went on to consider whether the directors had acted in breach of section 174 of the Companies Act 2006 (which is a part of the presumed claim for Misfeasance claim).

The Chief Registrar considered the evidence and law at paragraphs 28 to 34 and observed at paragraph 34 that:

… part of the modern landscape of corporate responsibility is to place on directors the obligation to ensure adequate monitoring and supervision of delegates’

 At paragraph 35 the Chief Registrar found:

In my judgment the duty of the Directors to acquire and maintain sufficient knowledge and understanding of the Company’s business to enable them to discharge their duties as director, is inescapable. It may seem harsh on the facts of this case that an incoming, inexperienced director should acquire the necessary knowledge and understanding of the Company’s operations, and ensure that it is compliant with issues as wide ranging as trading standards, health and safety and taxation.’

At paragraph 36 the Chief Registrar went on:

The Directors were not required to obtain the specialist knowledge of an accountant but needed, in my judgment to ask if the Company had an exemption for VAT rather than assume the situation. Reliance on the accountant’s silence demonstrates, objectively, a lack of care, skill and diligence.’

 37. … The Directors worked on an assumption and did not take any or any proper steps to discharge their duty of care and skill… The Directors obtained no advice but made an incorrect assumption and took no steps to validate the assumption.’

It was found that there was a loss to the Company caused by the failure to collect in VAT as the VAT will have to be met from its own resources rather than from customers (as per paragraph 42).

The directors should have asked the Company accountants about liability for VAT on the supplies (per paragraph 45). It was found at paragraph 46 that the Company should have been collecting in VAT from April 2010.

As to the directors’ request for relief under section 1157 of the Companies Act 2006 also failed (per paragraph 56) due to the failure to explore the tax position or to take advice which were found to be unreasonable steps.

The Director’s Friend comments:

This case is a harsh lesson for directors of a company. The Directors Friend says that if you wish to be appointed a director of a company then you must understand your duties to the company. The directors in this case have been made personally liable for the loss of VAT when the company did not register.

The directors assumed without checking that the company was not liable for VAT. They did not seek advice. They should have done so.

Therefore, the Director’s Friend says that three lessons need to be drawn from this case:

  1. Do not sign up to being a director without first understanding your duties;
  2. If you want to rely upon professional advice then you must ask for it; and
  3. If you delegate then you must monitor and supervise that delegation.

No doubt this has been a very expensive and harsh lesson for these directors.

WHAT TO DO NOW:

If you are faced with:

  • worrying insolvency issues with your company;
  • a claim against you for misfeasance / breaching your duties as a director to a company or any claim for personal liability; and / or
  • director disqualification

then please talk to me today on +44 (0)1992 558411.  That is in order to protect your position without delay.  The earlier that you speak with me the more that I can likely help.

The Director’s Friend is a Hertfordshire / London based solicitor and a full member both the Insolvency Lawyers Association and the Association of Business Recovery Professionals.

Until the next time...

THE DIRECTOR’S FRIEND


Signing a Surname

Husbands Who Take on their Wife's Surname

Signing documents

 

The BBC has this week issued a report on the increasing number of husbands who have chosen to take their wife’s surname rather than the wife taking the husband’s family name. Whilst there is no reason a husband should not be able to take his wife’s surname, it is often a more difficult process. If a wife chooses to take her husband’s surname, as is the tradition, all that is usually required as evidence of the name change is a copy of the marriage certificate. However, if the husband chooses to take his wife’s surname, the husband may need to execute a change of name deed to avoid any difficulties with the passport agency, banks or other professional institutions.

 

Our family department at Breeze and Wyles Solicitors Ltd offers a range of services, including the drafting and execution of change of name deeds. We also offer expert advice relating to protecting your interests upon marriage, including advice on co-ownership of property and nuptial agreements. We also specialise in separation, divorce, finances and children matters and can offer a personal service to meet your specific needs.

Call us on 01992 558411 and ask to speak to the Family Department

Or contact us here: http://www.breezeandwyles.co.uk/index.php/form-family-divorce/


The Importance of Capacity When Making a Will

Mental Capacity

For a Will to be a valid document the person signing the will (‘the Testator or Testarix’) must have capacity. Capacity can be assessed by looking at the testator’s decision making abilities and understanding on the date the document was signed. There is a presumption that a properly executed Will is made by a person with capacity. However this can be challenged with evidence.

The Testator must understand what he or she is doing. Any Will entered into where it can be shown that the Testator did not understand will be void. Key elements of this are;

  1. The Testator must understand the information relevant to the decision.
  2. The Testator must be able to use or weigh up any information when making any decisions in relation to the Will. So the Testator should understand what might happen as a consequence one way or another.
  3. The Testator must be able to communicate their decision. Communication can be verbal, using sign language, writing information down or any other means.
  4. A Testator will likely lack capacity if they suffer from a disorder of the mind. A disorder of the mind would cover any mental disorder that alters the Testator’s ability to make a decision or comprehend their decisions.

Please bear in mind that a person will not to be treated as unable to make a decision merely because they make an unwise decision.

If you have reasonable grounds to believe that your loved one lacked capacity when signing their will and you would like some advice please contact Sharon Matchwick on 01992 558 411

or click here: http://www.breezeandwyles.co.uk/index.php/form-wills/

NOTE:

This article deals only with capacity and does not cover other options that may be available if you have reasonable grounds to challenge the validity of a Will.


Divorce Split who gets the dog?

Cheryl Cole Dismisses Reports of a Split

Divorce Header

Cheryl Cole this morning dismissed reports of a split from her partner and father of her son, Liam Payne, instead focussing on her new charity project.

It remains to be seen whether the rumours of a break up are true and how this will affect the arrangements for their son, Bear. It is rumoured Liam holds a £54m fortune, Cheryl has only been valued at £20m. Reportedly Liam has called in Lawyers in an attempt to protect his wealth, although the parties are not married.

Here at Breeze and Wyles Solicitors Ltd we offer expert advice on all matters relating to children, including advice on contact arrangements and financial provision for children.

Our experienced lawyers also provide advice on all aspects of separation whether the parties are married or not, including advice relating to finances and how best to protect your interests.

We also offer family mediation, collaborative law and family arbitration within our broad range of services.

Call us on 01992 558411 and ask to speak to the Family Department

Or contact us here http://www.breezeandwyles.co.uk/index.php/form-family-divorce/

 


tug rope

Reports suggest Judge Rinder & Seth Cummings Split...

Recent media reports suggest Judge Rinder has separated from his husband, Seth Cummings after 11 years together.

Following changes in the law allowing same sex marriages, divorce is treated in the same way for same sex couples as for couples of the opposite sex. When issuing divorce proceedings in both cases, the petitioner must show the marriage has irretrievably broken down and must rely upon one of five facts; Adultery, Unreasonable Behaviour, 2 years separation with the other party’s consent, 5 years separation or desertion. It should be noted however, that the law remains the same in respect of Adultery; the petition must show the Respondent has had intercourse with another person of the opposite sex; it cannot be relied upon if the Respondent has had intercourse with a person of the same sex. It remains to be seen whether the law will be changed in that respect.  

Here at Breeze and Wyles Ltd we offer expert advice on divorce whether it is a same sex marriage or couples of the opposite sex. We also offer advice in respect of the dissolution of a civil partnership or separation advice. Our lawyers are highly trained in all aspects of divorce and separation including advice on finances and matters relating to children.

Call us to discuss further on 01992 558411


Signing a Surname

Does a periodic tenancy count as being repeatedly renewed/granted?

Signing Document
Signing Document

 

This was the subject of a decision in Walcott v Jones & Jones. Central London County Court, 15 November 2017

The tenants, who commenced a tenancy in 2007, argued that the Section 21 served was invalid because the Landlord had failed to adhere to the requirements of the Deregulation Act 2015. They argued that the oral monthly tenancy was a re-grant of the tenancy every month that each periodic tenancy was a re-grant of the tenancy and therefore the Landlord failed to comply with the Deregulation Act 2015 when serving the s21. The DDJ agreed in the first instance and the claim for possession was struck out.  Not surprisingly the Landlord appealed and the Appeal Judge held that a periodic tenancy for the purposes of Housing Act 1988 (as amended) did not amount to a ‘grant’ of a new tenancy . The tenancy merely continued. Parliament did not intend a ‘grant’ in such circumstances. The DDJ had erred in law and appeal allowed.

Whilst this is great news for Landlords it is important to note that from October 2018 the Deregulation Act will apply to all assured shorthold tenancies no matter when and how they commenced.

Should you be facing a similar situation, feel free to contact our Landlord and Tenant team on 01992 558411 and they would be more than happy to assist you.


Moving on

8th January 2018 AKA "DIVORCE DAY"

 

 

The beginning of the year always brings with it an increase in instructions as couples make the decision to separate. For some the stress over the festive period was simply too much for the relationship to bear; for others perhaps the decision was made towards the end of the last year but put on hold to allow for “one last Christmas”. Additionally, the New Year is generally a time when we are expected to take stock of our lives and make changes to tackle things that we are not happy with and it stands to reason that this applies just as much to problems with a relationship as with the other areas of our lives such as health or fitness.

A decision to separate is not one to be taken lightly. It has significant consequences for all concerned and especially children. Consideration should always be given to whether the relationship can be saved and in this respect marriage counselling can be of significant benefit. If however the breakdown is irretrievable, early advice from a specialist family solicitor will ensure that you are aware of your options going forward so that you know where you stand in relation to a divorce, the financial arrangements resulting from the separation and also the arrangements for the children.

Breeze and Wyles Solicitors Ltd are specialist family solicitors in Hertford, Enfield and Bishops Stortford, able to offer advice and support in relation to divorce and other family law matters. We are also one of only a few solicitors able to offer the full range of process options including mediation, collaborative law and Arbitration. More information of the services we are able to offer is available on our website , including details of our fixed fee services or alternatively call 01992 558411.


Director's Desk

THE DIRECTOR’S FRIEND BLOG - Breaches of Directors’ duties for health and safety offences can be costly!

Directors Desk
The Director's Friend

Breaches of Directors’ duties for health and safety offences can be costly!

 This is the next in the series of blogs for the Director’s Friend Blog.

 Introduction:

One area of law that impacts upon the duties of directors that appears overlooked is that of the personal liability and potential loss of liberty suffered by directors of companies in breach of The Health and Safety at Work Act 1974 (the “Act”).

The national regulator for work place health and safety is the Health and Safety Executive (“HSE”). Investigations and prosecutions of individuals for safety related breaches are increasing.  The fines imposed upon companies and individuals can be expensive.

Who can be prosecuted?

A wide range of entities and individuals can be prosecuted to include limited companies, individuals and directors or senior managers. Section 37 of the Act states:

“Offences by Bodies Corporate

(1) here an offence under any relevant statutory provisions committed by a body corporate is proved to have been committed with the consent or connivance of, or to have been attributable to any neglect on the part of, any director (emphasis added), manager, secretary or other similar officer of the body corporate or a person who is purporting to act in such capacity, he as well as the body corporate shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly”

Case Summary of a prosecution by the HSE:

In a recent press release the HSE confirmed that a Rochdale based car repair company and its director were fined after failing to comply with Improvement Notices (“IN”) issued by the HSE.

Rochdale MOT Centre Limited (the “Company”) and its director a Nazar Hussain (the “Director”) failed to comply with three INs.  The INs required the thorough examination of three two-post vehicle lifts by specified dates in the IN.  These offences were considered by Manchester Magistrates Court on 10 June 2016.            

Section 33(1)(g) of the Act makes it an offence for a person:

...to contravene any requirement or prohibition imposed by an improvement notice or a prohibition notice...

The Company and the Director of the Company pleaded guilty to breaching this section of the Act. They were ordered to pay fines of £1,500.00 and £3,000.00 respectively. In addition, both defendants were ordered to pay the full prosecution costs in the sum of £15,609.14.

Comment by the HSE Inspector:

The HSE Inspector, Sarah Taylor said that:

This case highlights the impact of HSE’s work, ensuring duty holders are held to account for their failings and taking the appropriate action to ensure workers are safe.

 All workers have the right to return home from work safe and healthy, but the Company and Director (emphasis added) in this case placed employees at risk of harm by failing to address concerns raised by HSE Inspectors.

A Director Disqualification?

The Magistrates Court would likely have had a jurisdiction under Section 2 of the Company Director Disqualification Act 1986 to disqualify the Director upon conviction of the offence under the Act which may have resulted in a maximum period of director disqualification of up to 5 years.

It would appear fortunate for the Director that he was not also disqualified as a company director and therefore possibly barred from continuing to trade his business. Although there are other options available.

Comment:

It can be seen that the duties of directors can extend in to areas that directors of companies wouldn’t necessarily consider such as health and safety law at issue here. The Director’s Friend says that the well-advised director would be wise to consider their duties and obligations under the Act bearing in mind the potential personal liability and possible director disqualification action that can arise following a prosecution and conviction of that individual director personally.

A final thought:

Sometimes directors may have insurance policies that will likely cover defence legal costs for these kinds of actions. However, the Director’s Friend says that any fine imposed upon a company following a conviction certainly will not be.  As a general principle, it is against public policy to be able to insure against a criminal act.  Similarly, where a Court orders the defendant to pay the prosecution’s reasonable costs in bringing a case, these costs are rarely covered by business insurance and may have to be funded by the business/individual themselves.

So, it is even the case that if you have protected yourself by way of taking out an insurance policy that is not a panacea to pay off all or any liability that the company or you as a director may face under the Act.

What to do now:

If you are faced with:

  • Potential personal liability in your capacity as a director under the Act;
  • Director disqualification; and / or
  • All other forms of personal liability in your capacity as a director

then talk to me today on +44(0) 01992 558411.

 That is in order to protect your position without delay. The earlier that you speak with me the more than a can likely help.

I am a Hertfordshire/London based solicitor and a full member of both The Insolvency Lawyer’s Association and The Association of Business Recovery Professionals.

Until the next time ...

THE DIRECTOR’S FRIEND

 


Testimonial for the Wills and Probate team

"Finally may I thank you and your colleague Donna for the efficient and professional way you have dealt with my requirements. It's not the easiest process to go through and you have reduced any stress that would normally come with this to zero. So thank you."

B. Longley

01/12/2017


banking

Stamp Duty relief for First time Buyers

Piggy Bank Budget savingsThe budget is out, with £15.3 billion new financial support for house building over the next five years and with the Government setting aside £1.2 billion to buy land and £2.7 billion for related infrastructure.  The Government announced plans to create five new so-called ‘garden’ towns, and there was a headline-grabbing cut in stamp duty for first time buyers.

Stamp duty is currently paid on property purchases over £125,000, with a ‘slice’ tax where buyers pay at the relevant rate for each band, rather than a flat rate across the whole amount.  With immediate effect, stamp duty is abolished for first-time buyers on properties worth up to £300,000, or on the first £300,000 of a property worth up to £500,000.

Property law expert and Solicitor Johanna Withams based in our Bishop’s Stortford office said: “The change in stamp duty has caught most of the attention.  It’s certainly a move that will be welcomed by first time buyers, but does add yet more complexity to the application of this particular tax, where we already have different rates for second home owners and landlords.

“Buyers need to read the small print before rushing out to make an offer, as there are clear distinctions on who is eligible. It will not apply if any property has been owned at any previous time, whether here or anywhere else in the world, and it must be the only or main home for the buyer.  In a joint purchase, everyone would need to qualify as a first-time buyer.  Buyers will need to check out the detail with their solicitor, and the benefit must be claimed when the Stamp Duty Land Tax return is made to HMRC during the purchase process.”

If you have any questions, or wish to discuss your potential purchase through with us, please give us a call at any of our offices based in Bishop’s Stortford, Hertford and Enfield. 01279 715555, 01992 558411 or 0208 366 6411

Web site content note: 

This is not legal advice; it is intended to provide information of general interest about current legal issues.

Reference:

https://www.gov.uk/government/speeches/autumn-budget-2017-philip-hammonds-speech

https://www.gov.uk/government/publications/autumn-budget-2017-documents