Two Chesterfield men have been banned from running businesses for ten years after an investigation by the Insolvency Service.
Lee Anthony Pitchford and Jason Pollard were both directors of Baker Donald Ltd which was initially incorporated in November 2011 as a hairdresser. But in March 2012, it began trading as an insolvency practice, providing general corporate insolvency advice and referred clients to a firm of insolvency practitioners. The company also offered a debt collection service to a number of its clients. Mr Pitchford and Mr Pollard were the only directors at this point.
In March 2013, Baker Donald began trading as a licensed insolvency practice dealing predominately with corporate insolvencies; employing an in-house insolvency practitioner.
Baker Donald was linked to another company that offered both accounting and insolvency services. This company provided an ‘in-house’ insolvency practitioner to take on formal insolvency appointments that had previously been referred to external insolvency practitioners by Baker Donald.
On February 11 2014, the Secretary of State for Business, Innovation & Skills, issued a public interest winding up petition against the company, including on the grounds that the company was issuing misleading marketing letters, failing to properly deal with money received and failing to maintain accurate records. On 18 February 2014, a provisional liquidator was appointed on the application of the Secretary of State for Business and on 17 April 2014, a winding up order was made against the company.
The Insolvency Service investigation found that:
• Mr Pitchford and Mr Pollard failed to ensure that Baker Donald Limited operated with commercial probity or in a competent manner.
• the accounting records were not adequate or complete, and were materially inconsistent with the accounts filed for the year ending November 30 2012.
• in at least seven cases dating from before Baker Donald traded as a licensed insolvency practice, there were inadequate records to explain, support or justify significant fees charged and work asserted to be undertaken. The inadequate documentation included the lack of a written agreement or evidence of agreed terms relating to the collection of book debt proceeds on behalf of a least five clients.
• between March 2012 and March 2013, the trading relationship with a firm of insolvency practitioners could not be ascertained with any accuracy, including the identity and number of cases referred and the moneys properly due.
• Baker Donald did not properly and appropriately deal with the sums of money it had received through its trading practices. It failed, either deliberately or through its poor record keeping, to properly segregate money due to clients, third parties and itself. As a result, the Secretary of State concluded that Baker Donald had either taken money (in relation to its own fees) that ought to have been paid elsewhere and/or returned to its clients - money that ought to have been paid to third parties.
• Baker Donald’s global client account was used as an informal unregulated banking facility with no consistency as to the level of fees charged for its use. The use of Baker Donald’s account created an additional and unnecessary layer of activity and bureaucracy such that income from book debts received was capable of being concealed from creditors.
• Baker Donald did not transparently describe and disclose the work it would perform nor declare the actual work performed and the true extent of fees charged. There was a lack of transparency in disclosures to creditors within the proposals and statement of affairs as to the actual work performed by Baker Donald and the true extent of fees charged. In the majority of cases the fees charged amounted to the same or close to the value of asset realisations.
• On at least eight files reviewed during the investigation, there were signed terms of engagement with the relevant directors of the client companies. Within these documents there is no reference to the actual work to be undertaken and the agreed remuneration rate for any work undertaken.
• Baker Donald issued misleading marketing documents as to its full and true charges. Baker Donald issued marketing letters to companies in financial difficulties offering its services for £495. Records produced show that Baker Donald’s fees exceed this sum with standard client letters for both CVLs and CVA’s cases detailing an initial fee of a least £1,000, and on average the fee was £4,200.
The Secretary of State accepted an undertaking from Lee Anthony Pitchford on December 3 2015 and his disqualification commenced on December 24 2015. The Secretary of State accepted an undertaking from Jason Pollard on December 15 2015 and his disqualification commenced on January 5 2016.
The disqualifications prevent Mr Pitchford and Mr Pollard from directly or indirectly becoming involved in the promotion, formation or management of a company for the duration of their bans.
At the time of Liquidation the Official Receiver was unable to establish an accurate figure for Baker Donald’s assets. Liabilities were estimated to be £60,572.
Commenting on the disqualification, Cheryl Lambert, Chief Investigator at the Insolvency Service, said: “Directors have a duty to ensure that they act competently and with commercial probity. Directors who do not comply with this basic obligation can expect to be investigated by the Insolvency Service and enforcement action taken to remove them from the market place.
“In this case Mr Pitchford and Mr Pollard misled clients, failed to act with transparency and did not protect their clients’ money when they had a duty to do so. Their conduct demonstrates that they are unfit to be directors of a company.
“Taking action against Mr Pitchford and Mr Pollard is a warning to all directors to seriously consider their actions and to comply with their obligations.”