Conduct during directors’ disqualification proceedings earns director increased period of disqualification (Secretary of State for Business, Energy and Industrial Strategy v Al-Safee)

Conduct during directors’ disqualification proceedings earns director increased period of disqualification (Secretary of State for Business, Energy and Industrial Strategy v Al-Safee)

The defence presented during director’s disqualification proceedings and at trial was untrue. Mark Baldwin of Howes Percival LLP, who represented the successful claimant, considers the attitude that the court took to this when setting the period of disqualification.

Re Exotic Global Ltd; Secretary of State for Business, Energy and Industrial Strategy v Al-Safee [2018] EWHC 509 (Ch), [2018] All ER (D) 211 (Mar)

What are the practical implications of this case?

The main practical point of this case is that defendants in proceedings brought under the Company Directors’ Disqualification Act 1986 (CDDA 1986) can expect a higher period of director’s disqualification if they pursue a defence which is patently untrue. The decision applied Court of Appeal’s approach in Re Howglen Limited; Secretary of State for Trade and Industry v Reynard [2002] EWCA Civ 497, [2002] 2 BCLC 625.

What was the background?

Mr Al-Safee was a director of Exotic Global Limited (Exotic), which went into creditors’ voluntary liquidation on 3 June 2015.

The Secretary of State had initially sought a period of 10 years disqualification in the sent under CDDA 1986, s 16 to Mr Al-Safee, prior to the issue of proceedings. Post-liquidation, Mr Al-Safee had barely engaged with the liquidator or the Secretary of State’s investigation into the conduct of the company’s directors, replying only by way of a handful of emails.

The Secretary of State issued proceedings against Mr Al-Safee seeking a director’s disqualification order on the basis that Mr Al-Safee had failed to maintain and preserve or deliver up adequate accounting records for Exotic. The lack of accounting records meant that the following matters, among others, could not be verified or explained:

  • why Exotic had not accounted for the import VAT on 14 high end motor vehicles imported by Exotic
  • whether the 14 vehicles had been disposed of by Exotic, and
  • the disposal of another 45 motor vehicles and two cherished number plates acquired by Exotic

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About the author:

Neeta has been working as a paralegal in Banking and Insolvency for the past 4 and a half years.

She started her legal career at Allen & Overy in 2008 in the midst of the global financial crisis and the collapse of Lehmans where she gained most of her experience.

Neeta also did a short stint in litigation at the Revenue and Customs Prosecutions Office. Neeta graduated with a 2:1 honours degree from University of London, Queen Mary College and went on to obtain a distinction from the College of Law in the Legal Practice Course. She moved to Lexis®PSL in April 2013.