Key Facts
- •Ms Helen Anderson was a director of Paranoid Expedition Engineering Limited (the Company), which went into administration.
- •The Company made payments totaling £137,810 to Paranoid Engineering Limited (PEL), another company where Ms Anderson was a director and shareholder.
- •The Company received loans under the Coronavirus Business Interruption Loan Scheme (CBIL) and Bounce Back Loan Scheme (BBL).
- •The Secretary of State alleged that the payments to PEL were detrimental to the Company's creditors and breached the terms of the CBIL and BBL agreements.
- •Ms Anderson argued that the payments were in repayment of a debt owed to PEL and to secure future support from PEL.
- •The Company was insolvent during the period of the payments.
- •Ms Anderson failed to provide sufficient evidence to support her claims.
Legal Principles
A disqualification order under s.6 of the Company Directors Disqualification Act 1986 (CDDA) can be made if a director's conduct makes them unfit to be concerned in the management of a company and the company became insolvent.
Company Directors Disqualification Act 1986, s.6
Determining unfitness involves a three-stage process: (1) misconduct, (2) justification for unfitness, (3) disqualification period.
Re Structural Concrete Ltd [2001] BCC 578
Conduct must fall below standards of probity and competence appropriate for directors.
Re Grayan Building Services Ltd [1995] Ch 241
Transactions detrimental to a company or its creditors may warrant disqualification.
Re Deaduck Ltd [2001] 1 BCLC 148
Misuse of bounce back loans not used for intended purpose constitutes misconduct.
Secretary of State for Business, Energy and Industrial Strategy v DEEA Construct Ltd [2023] EWHC 2084 (Ch)
The Corporate Insolvency and Governance Act 2020 (CIGA) suspension of liability for wrongful trading does not excuse breaches of directors' duties or misconduct under the CDDA.
Insolvency Act 1986, s.214; Corporate Insolvency and Governance Act 2020, s.12
Outcomes
Disqualification order made against Ms Anderson for 7 years.
Ms Anderson's conduct in making gratuitous payments to PEL while the company was insolvent and in breach of loan agreements constituted misconduct and unfitness to be a director.