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Directors Who Thwarted Provisional Liquidator Jailed for Contempt

In a warning to the business community that the consequences of disobedience to court orders can be more than just financial, three company directors who moved more than $600,000 abroad after learning of the appointment of a provisional liquidator have been jailed for their contempt of court.

The liquidator had been put in place by the High Court at the behest of HM Revenue and Customs (HMRC), which claimed that the company owed more than £7.7 million in VAT. The liquidator, accompanied by a solicitor and a process server, attended the company’s premises and explained the terms of the order.

However, in a little more than 24 hours after their visit, the directors had arranged the transfer of $624,625 to a company based in Dubai. This had the effect of clearing out the company’s cash assets. HMRC brought contempt proceedings on the basis that the liquidator was an officer of the Court and that the directors had prevented or impeded him from carrying out his duties.

The Court noted that the directors had admitted their contempt and that the money had been paid out to a favoured creditor. However, in doing so, they had usurped the liquidator’s function and had intentionally thwarted the purpose of the court order by which he was appointed. The directors had been motivated by a desire to preserve the company’s trading position. Nevertheless, their contempt was serious and each of them was handed a six-month jail term.