In a recent case a company director, Paul Edward Raine, was prosecuted for committing what the courts deemed a serious and deliberate breach of section 216 of the Insolvency Act 1986. This states that it is an offence for someone to become a director of another company under or known by a prohibited name within a period of five years if they were a director of the insolvent company at any time during the year before it went into liquidation. A prohibited name is any name by which the liquidated company was known at any point in the twelve months prior to the liquidation, or any name similar enough to suggest an association with that company.
Mr Raine was a director of a bed company called Furntex Ltd., which used the trading name Dreamsleeper. The company had entered into voluntary liquidation, owing more than £500,000 to creditors. Shortly before the insolvency took place, Mr Raine incorporated a ‘new’ company called Dreamsleeper Ltd., which was also a bed company, breaching Section 216. This company also failed and was placed into liquidation, costing creditors nearly £200,000.
The Department for Business, Enterprise and Regulatory Reform as was (now the Department for Business, Innovation and Skills) sought a conviction due to Mr Raine’s contravention of Section 216. He pleaded guilty and was sentenced to a twelve week suspended prison sentence and 150 hours of community service. In addition, he was ordered to pay costs of £591 and was handed a three year blanket ban from serving as a director.
For advice on any insolvency issue, please contact Leanne Schneider-Rose.
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