Ban for boss who prioritised directors loan over creditor payments
10 Sep 2019
The boss of a greetings card business has been disqualified for six years after approving transactions that were detrimental to creditors, who were owed over £1.7m when the company went into liquidation
10 Sep 2019
James McAllister, who currently resides in Marbella but was originally living in Scotland, was the sole director of Greetings (International) Ltd – now known as Acquisition 395215436 Ltd – based in Irvine.
Incorporated in February 2004, the company traded as a greetings card wholesaler and retailer in Scotland, Ireland and Northern Ireland.
McAllister, who became the sole director in February 2007, resigned the position in October 2016, five months before Acquisition was wound up by order of the court in Glasgow in February 2017. At liquidation, the company owed more than £1.76m to creditors.
A subsequent Insolvency Service investigation uncovered that McAllister had acted in a manner that was detrimental to the interests of the company’s creditors.
He took out a director’s loan from the company and the overdrawn loan accrued to at least £235,000 by the time he had resigned.
McAllister was also the sole shareholder of a separate holding company based in Gibraltar, and in the months leading up this his resignation he transferred half of his shares to a former company secretary of Acquisition 395215436. A day later he then transferred the remaining shares from the separate holding company to Acquisition in lieu of settling his director’s loan.
As director of Acquisition it was his duty to scrutinise this transaction and obtain a formal written valuation of the Gibraltar company, but he failed to do so.
Investigators also uncovered that the book value of the Gibraltar-registered company was nearer £25,000 and would not have covered the value of the director’s loan.
Finally, on the day he resigned as a director of Acquisition, McAllister caused the company to sell those shares to a third party, who passed them back to the original company in Gibraltar.
When Acquisition entered liquidation in March 2017, these assets, or their quoted value, were not available to creditors of the company.
Robert Clarke, chief investigator for the Insolvency Service, said: ‘James McAllister flagrantly abused his position as company director, failing to perform the due diligence expected of him in order to clear his director’s loan and causing his company’s creditors to suffer as a result. This behaviour is totally unacceptable.
‘This ban should serve as a warning to other directors tempted to help themselves first: you have a duty to your creditors and if you neglect this duty you could be investigated by the Insolvency Service and removed from the business environment.’