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Disqualified Director running company


Hi all

I have found out that someone that I work with is a disqualified director and is in effect running a new business although they are not named as the director of new co. Are there any legal obligations on my part to advise someone about this? If so what if anything are the implications on me if I do not report them.

Many thanks for y our help



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Employer or client?

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client, but is there a difference if I was an employee?

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Who is your governing body?


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Yes there is a difference as to how and where to report.

You need to report via SAR under Money Laundering.

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Guru

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Its quite common for companies and directors to do this. I am not sure it is a Suspicious Activity issue but will most definitely increase the AML risk. You should look at your identity information and risk test for the actual directors and shareholders to ensure they are aware of their duties and responsibility.

Need to ensure that things like employment law are being adhered to i.e. As he is not a director then he needs to comply with things like contracts, minimum wage, auto enrolment.

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Phil Hendy, The Accountancy Mentor

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Common?!

Who else is involved is the question.

A person who has been disqualified as a director is not permitted to act as a company director but he is also not permitted to in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court", per section 1 Company Directors Disqualification Act 1986.

Note promotion means marketing. Management means running

In such circumstances they may be personally liable for debts of the company (s15(1)(a) CDDA 1986) and liable to criminal penalties (s13). The person nominally acting as director may also be personally liable for company debts if he knowingly acts on the instructions of a disqualified person, s15(1)(b).

If the disqualified individuals are receiving remuneration (salary or benefits in kind) in relation to their roles in the management of the company then that is a 'benefit' derived from criminal conduct. The possession, use or transfer of such a 'benefit' is (or may amount to) a money laundering offence. Suspicion of such a money laundering offence would trigger an obligation upon you to report to your firm's MLRO or to SOCA under Money Laundering Regulations 2007 / s330 Proceeds of Crime Act 2002.

You have at the very least a strong suspicion that they are behaving illegally. Therefore iat is not your decision to make, but MUST be reported, for someone else to decide. The whole point of an SAR (Suspicious being the key word)

Persons of Significant involvement - not listed? That is what that is supposed to be for - to catch such folk, but it relies on honesty in completion of the forms, hence why such will never work.



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Forum Moderator & Expert

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We really need a thumbs up facility on this forum. Excellently put Casu.

Can I just add to your excellent post

Fiona,

from ACCA guidance in this matter (refering to CDDA 1986).

Penalty for breach of a disqualification order
Anyone who acts in contravention of a disqualification order is liable for either:

i. imprisonment for up to two years and/or a fine, on conviction on indictment
ii. imprisonment for up to six months and/or a fine not exceeding the statutory maximum, on conviction summarily (S13 of the CDDA1986).

Under S14 where a company is guilty of an offence under S13, then any person who consented or contributed to its so doing will also be guilty of an offence. In addition S15 imposes personal liability for company debts arising during a period when a person acts as a director while disqualified, either under an order or while personally bankrupt. The Secretary of State is required to maintain a register of disqualification orders which is open to public inspection (S18).

Note the section 14. ANY PERSON WHO CONSENTED OR CONTRIBUTED IS ALSO GUILTY OF AN OFFENCE!!!!

You should seek advice from the legal team of your professional body as to how to progress this (all of the accounting and bookkeeping bodies including the smaller ones have legal teams for their members for just this sort of eventuality).

When you have spoken to then you may find this link to the Insolvency service useful : https://www.insolvencydirect.bis.gov.uk/ExternalOnlineForms/BreachQuestionnaire.aspx

This will of course mean that you are going to be walking away from this gig... But thats better than being driven away in the back of a police car

Phil,

I think that the way that you phrased that as being "quite comon" your reply comes accross that because some disqualified directors try it on after being banned from having anything to do with running a company, it's acceptable. Which of course I know that couldn't be what you meant but sometimes the written medium doesn't come accross to the reader as we intend it to (I'm guilty of that sooooo many times for things that seemed perfectly reasonable on the journey between my head and fingers).

kindest regards,

Shaun.



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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.



Veteran Member

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Thank you all for your replies.

I have not contributed to the running of a company. I have merely run the payroll and updated the ledgers. I have accounted for things correctly so how could I be guilty of an offence particularly if I was misled?

So to clarify is there a legal obligation upon me to report this?

Many thanks

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Forum Moderator & Expert

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If you are in a position to know that an offence is being commited then to not report an offence is ostensibly compliance with it (deemed consent).

As previously mentioned. Seek advice from the legal team of your professional body as to your next actions. There should not be any additional charge for that advice.





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Shaun

Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.



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Thank you. I feel so upset about this as I have been so misled. I know that I have done nothing wrong and was doing as good job for them too!

I will make the call.

Thank you

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Master Book-keeper

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Hi Fiona
Some great advice there. Its very easy to say and very hard to do - but try hard not to take this one personally. This is clearlynot your fault, they are completely to blame. Such folk, if they can act in this way, despite the sanctions they have already received, will surely be up to more be it now or some point in the future. Just consider this a lucky escape at an early juncture.

Just remember not to tip them off. Supply them with a disengagement letter as soon as practical and get the hell out.

Now go and get a glass and wine!

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Joanne McCormick

Fallows Hall Ltd

Winner of Bookkeeper of the Year 2015

Winner of Bookkeeper of the Year 2016

Thoughts are my own and not to be regarded as official advice, which should be sought from a suitably qualified Accountant.



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Thank you

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Guru

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Phoenixing is very common. The person involved is allowed to be an ordinary employee. The key then is to be satisfied that the person in charge really does have control. Who makes key decisions, who signs the paperwork, are they acting in a way that a 3rd party would assume they were a director

I can see why you would want to report. The law is clear; however, these type of people are often clever in how they go about this.

I absolutely detest the phoenixing option and if any client is looking like going down that route with me then I would and have disengaged.

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Phil Hendy, The Accountancy Mentor

Are you thinking of setting up your own practice or have you set up and need some help?

If so a mentor may be the way forward - feel free to get in touch and see how I can assist you.



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Hi Phil.

Thank you for your response. I am not saying that I want to report I am just wondering if I have a legal obligation too and what would be the impact of me if I didn't. Financially it would hit me hard. I am also concerned about the impact on all the staff that the new company employs. New co has turned a corner and has every chance of being successful which is frustrating!

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Hi Fiona
Im not sure how much clearer this can be made! You have a legal obligation to report under MLR. Plus surely the ''Under S14 where a company is guilty of an offence under S13, then any person who consented or contributed to its so doing will also be guilty of an offence.'' stresses this - you will have contributed to it by allowing it to continue. Failure to report can mean imprisonment for you. The company may have turned a corner but what did this Director do to be banned in the first instance? They do not just ban someone for nothing. He cannot do what he is doing unless he has the leave of the courts. Reporting him means any investigation will check out if he has that. Or he will be sanctioned further. But at least you will not be as well. What will hit you hard financially? Losing this client? If so then sorry its a hard lesson to learn and one why you need a spread of clients rather than becoming over reliant on one. Failure to report could hit you harder financially when you are imprisoned then struck off and cannot work as a bookkeeper.



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Thank you. It is just rubbish that I have to do this as this will impact about 20 staff members as the business may not be able to continue without this one person. But this person knew what they were doing and has just been so dishonest. Am feeling very cross.

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Master Book-keeper

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Where did the phoenixing idea come in? Is that what has happened here?

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Joanne McCormick

Fallows Hall Ltd

Winner of Bookkeeper of the Year 2015

Winner of Bookkeeper of the Year 2016

Thoughts are my own and not to be regarded as official advice, which should be sought from a suitably qualified Accountant.

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