Director of insolvent company ordered to repay £188,000
A director has been ordered to repay more than £188,000 after his business went into liquidation.
Michael Edward Belcher was the sole director of BM Electrical Solutions Ltd.
The company had filed one set of accounts for the period to 31 January 2012. These disclosed a net asset position of £6,465, of which the profit and loss account was £6,365. No dividends were declared.
BM Electrical maintained loan accounts for Mr Belcher and for another director until he left after a dispute. Both accounts were in credit.
BM ran into difficulties because of a significant bad debt from a customer and because of issues with HMRC related to tax alleged to be due.
The liquidator reviewed BM’s bank statements and identified: bank transfers to Belcher of £221,034.94; cash withdrawals of £38,122.04; payments to an online betting company of £10,242; miscellaneous payments for restaurants, gambling and football season tickets of £8,447.53.
After allowing for a credit balance of £4,215.00 as at 31 January 2012, the liquidator found that Belcher had received the sum of £273,631.51 from the company without explanation, which net of his salary came to £232,674.51.
Belcher claimed that he had BM's accounts on a computer that he could no longer access.
The case went to the High Court, which held that there was no documentary evidence demonstrating that any part of the monies received was treated in BM’s books as salary.
The liquidator accepted that he should give credit of £40,957.00 in respect of Belcher’s net salary.
The court calculated that the sums outstanding on Belcher's loan account amounted to £193,029.97 less £4,215.00 which was the credit as at 31 January, 2012. He had to repay that sum to BM as a debt.
Please contact Jon Alvarez if you would like more information about the issues raised in this article or any aspect of company law.