Section 388 of the Companies Act 2006 requires company directors to ensure that their companies maintain accounting records which explain each company’s transactions and disclose with reasonable accuracy at any time the company’s financial position. They must also preserve those records for a period of time, which varies depending on whether the company is a private company or a public company. Failure to keep and preserve records as required is a criminal offence.
If a company goes into liquidation, the directors have to provide the records to the Official Receiver or the liquidator of the company. Again, failure to do so is a criminal offence.
James Patrick Lloyd was the sole director of an electrical and heating installation company called Quality Building Developments Limited. The company went into liquidation in September 2009, with total debts of £269,612.
Mr Lloyd handed over five boxes of records to the Official Receiver, but those did not include any records of wages paid to subcontractors, nor any construction industry scheme records, and Mr Lloyd failed to provide any explanation for cheques cashed totalling over £1million.
He decided to plead guilty to the charges, and is now languishing in prison.
Neil John Bowers and Andrew William Vinnis were directors of Waste2Go (Cambs) Limited, a recycling and scrap company, which went into liquidation in July 2009 owing about £139,561 to creditors. Villas produced some records for the Official Receiver, but these were hopelessly incomplete.
The Official Receiver eventually tracked down some bank statements, and discovered that, shortly before the liquidation and at a time when the company was under pressure from creditors, Bowers had paid some £33,500 to another company of which he was a director.
Both directors chose to plead guilty to the offences of which they were charged. Bowers (failing to preserve records and defrauding creditors) received a suspended prison sentence and was ordered to perform 120 hours unpaid work, whilst Vinnis (failing to preserve records) was also ordered to do 120 hours unpaid work
Record keeping can be a chore. After all, we all want to be getting on with doing what we do and – hopefully! – making money rather than messing about with paperwork. But the consequences of ignoring it can be serious. One of the significant things about these two cases is that they were not huge companies – even small businesses need to take record keeping seriously.
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