Director disqualified for paying herself ahead of other creditors

19 May 2013

The director of Titcombe Garage Ltd, a vehicle recovery and repair garage in Swindon, has been disqualified from being a company director for six years.  Linda Ann McCracken paid herself and a friend £247,436 instead of other creditors.  The firm went into liquidation at the end of 2010 owing almost £400k.

These payments were made in the weeks leading up to the liquidation and against advice from lawyers the payments were made.  The friend was a director of a consultancy business.

Ms McCracken was subsequently declared bankrupt in July 2012 on the petition of the liquidator for failing to return the funds she took out of the company, which had been in the form of a director’s loan.

Commenting on Mrs McCracken’s disqualification, Chief Examiner David Brooks said: “This result should serve as a timely reminder to directors that any self-serving actions, resulting in removal of company funds or assets when a company is insolvent, are a breach of their obligations to the company and its creditors, and are likely to lead to serious sanction."

Basically if a specific action doesn't feel right then it probably isn't.  If you are worried about directors disqualification then that is actually a good thing.  It shows that you know that when a business is insolvent then your actions as a director are under scrutiny.  So as long as you take advice and do not favour one set of creditors against another then you should be OK.