10-year ban for ex-BHS director Dominic Chappell
6 Nov 2019
Former BHS director Dominic Chappell has been disqualified for 10 years, and his father given a five-year ban, following an Insolvency Service investigation into a series of financial dealings involving the retail chain
6 Nov 2019
Ex-racing driver Chappell bought BHS for £1 from owner Sir Philip Green in 2015. The business collapsed into administration a year later, leading to a number of inquiries into the nature of the deal, the fate of the company’s pension scheme and the role of its auditors, PwC.
During the hearing the court heard that, while a director of BHS Ltd, Chappell wrongfully diverted £1.5m of funds from BHS Ltd to a company based in Sweden. The transaction took place one day after the potential appointment of an administrator for BHS Ltd had been discussed by the board of directors.
Chappell also transferred more than £1m to Retail Acquisitions Ltd (RAL), a company he was also a director of and 90% shareholder at the time. The funds should have been retained by BHS and BHS Properties as proceeds from property sales in London’s Oxford Street and Sunderland respectively.
The court heard that during the time he was the sole director of RAL, Chappell failed to maintain, preserve or deliver up adequate accounting records to the Insolvency Service. As a result, investigators have been unable verify the receipt of shares by RAL in a Portuguese property company.
Investigators believed the purchase of the shares were achieved through a series of transactions where £1.5m, which had been borrowed from BHS Group Ltd, was then lent to two companies, JDM Island Properties Ltd and Wheatleys Bridge Ltd, which owned a property occupied by Chappell’s father, Joseph Chappell. The security held against that property was then exchanged for shares in the Portuguese company.
Investigators were also unable to establish the circumstances behind a £2m payment from BHS to RAL, as well as payments of over £1m made by RAL directly to Chappell.
The inadequate records also meant that investigators were unable to explain or verify the circumstances under which Chappell caused RAL to borrow £500,000 without the knowledge of his then co-directors.
Of this loan, £275,000 was used by RAL to buy a US company, while £221,960 of the remaining balance was paid to a company that Chappell’s father was a de facto director of before being paid on to Chappell or for his benefit.
The US company never traded but was later sold for $201,000 (£156,000), with the proceeds being paid into Chappell’s personal bank account.
The court also found that Chappell had failed to comply with statutory obligations requiring him to provide information relating to the BHS pension schemes.
His father Joseph Chappell was disqualified for his role as director of Swiss Rock and three other companies, Capital Management Ltd, Newport Management Ltd and Base Technology.
These three companies were involved in a number of financial transactions involving the distribution of funds, including to Dominic Chappell. These transactions remain unexplained due to Joseph Chappell’s failure to maintain, preserve or deliver up adequate accounting records.
A third director, Colin Sutton, had previously been disqualified for five years in April 2018 for failing to ensure that Capital Management filed accounts and failing to maintain, preserve or deliver up adequate accounting records.
Sutton also allowed Capital Management to be used as a proxy for RAL and Swiss Rock but Capital Management’s records were inadequate to explain those dealings, including payments for vehicle and marine goods and services, as well as £205,000 paid to Dominic Chappell.
Claire Entwistle, assistant director for the Insolvency Service, said: ‘Both Dominic and his father abused their responsibilities as directors. Not only did they carry out reckless financial transactions but they failed to maintain adequate company records – a basic requirement for any responsible director.
‘The courts have recognised the severity of their actions and the bans handed down will seriously curtail their opportunities to manage companies.’