Recruitment director receives ban after paying himself £150k prior to liquidation

A Recruitment director has been banned from managing companies for six years after paying himself a £150,000 bonus just before his company entered into liquidation.

The investigation found that on 15th July 2020, Roy Davies from Rochdale, Lancashire, is banned for six years from acting as a director or directly or indirectly becoming involved, without the permission of the court, in the promotion, formation or management of a company.

LTG Recruitment Limited was incorporated in April 2015 and Roy Davies, formerly of Frodsham, Cheshire, was appointed a director at the same time.

Davies used the ‘EMS’ brand name extensively across various recruitment companies, including LTG Recruitment, but only a year after incorporation, LTG Recruitment entered into liquidation in October 2016 and this brought the company to the attention of the Insolvency Service.

Investigators established that between August 2015 and September 2016, LTG Recruitment incurred liabilities owed to the tax authorities. Roy Davies, however, caused the company to loan himself more than £114,000, while also paying more than £38,000 to an associated company.

At the point of liquidation, LTG Recruitment owed more than £289,000 to the tax authorities, while four other recruitment companies that Davies was also a director of and went into liquidation in February 2016, also owed close to £700,000 to the tax authorities.

Davies also borrowed money from some of the connected companies and owed nearly £300,000 net when they entered in liquidation.

Further enquiries uncovered that prior to LTG Recruitment entering into liquidation, Davies caused the company to seek advice from an insolvency practitioner in September 2016 about the future options for the company.

On the same day, however, Davies caused the company to award himself a salary bonus of more than £152,000. After-tax, which LTG Recruitment did not pay,  Davies’ bonus was £82,000 and this was used to reduce the amount of money he owed to LTG Recruitment.

Payments made to the associated company, £14,000 worth was paid after instructions had been given to liquidate the company.

On 24th June 2020, the Secretary of State accepted a disqualification undertaking from Roy Davies after he did not dispute that he caused LTG Recruitment to trade at the risk, and to the ultimate detriment of, the tax authorities, and enter into transactions which were to the detriment of the company’s creditors.

Rob Clarke, Chief Investigator for The Insolvency Service, said “It is bad enough that Roy Davies received substantial payments from LTG Recruitment, leaving the company unable to pay its creditors when the company collapsed. But knowing from the previous failures that he would be pursued for repayment of his loan account, he also took steps to ensure that he would not be required to repay the money he had received when LTG Recruitment went into liquidation.”

“This ban should serve as a warning to other directors tempted to put themselves first, you have a duty to your creditors and if you neglect this duty you could be disqualified and lose the privilege of limited liability trading.”