The boss of a greetings card business has been disqualifed as a director for a period of six years. The secretary of state found the director, formerly of Kilmarnock, had racked up significant director's loans shortly before resigning as director. He attempted to off-set these loans by transferring shares in another company, but the greetings card business was latterly placed into insolvency. By that time the shares, which had questionable value, had been transferred to a third party.
The Insolvency Service noted that the director "flagrantly abused his position as company director, failing to perform the due diligence expected of him in order to clear his director's loan and causing his company's creditors to suffer as a result. This behaviour is totally unacceptable".
This decision serves as a timely reminder for directors: there is a duty to creditors and that duty must be taken seriously. Directors who disregard their duties face investigation by the Insolvency Service.
The lesson here is that when it becomes apparent that a company is in financial difficulty, directors must act to protect the interests of creditors first and foremost, not themselves.
This ban should serve as a warning to other directors tempted to help themselves first: you have a duty to your creditors and if you neglect this duty you could be investigated by the Insolvency Service and removed from the business environment.