SECRETARY OF STATE FOR BUSINESS, INNOVATION & SKILLS v HARRISS & ORS (2016)

A company director, who had agreed to a four-year disqualification, would be permitted to act as director on an interim basis until the full hearing of his application for permission to continue to act as director. He had an arguable case that it was necessary for him to act as director, and appropriate arrangements to protect the public could be put into place.

The applicant company director applied for interim permission to continue to act as director of 18 companies despite his undertaking to the respondent secretary of state not to do so for four years.

 

The companies were interrelated and were linked to property development. As sole director of some of the companies, the applicant admitted that he had fallen under the influence of a third party, his father, who was himself subject to a disqualification undertaking and a bankruptcy restriction undertaking. The applicant had allowed his father to act in the management and administration of the companies. The applicant gave the secretary of state an undertaking that for a four-year period he would not act as director or be directly or indirectly concerned in the formation, promotion or management of any company without the court’s leave. He applied for permission to continue to act as the director of each of the companies.

 

The issues were whether interim permission to act as director should be given, pending the full permission hearing, and if so for how long.

 

HELD: (1) In determining whether to grant interim relief, the issue was whether the applicant had a seriously arguable case that some relief would ultimately be given; namely, an arguable case that it was necessary for him to continue to act as the director of each company, and a sufficiently arguable case that the court should permit him to act as director, in light of the seriousness of the offence that had led to his disqualification. The court also had to consider the balance of injustice, with regard to the need to protect the public from the misconduct of directors. The court’s provisional view, based on the limited evidence at the instant hearing, was that with respect to each company, the threshold had been crossed in that there was an arguable case for the grant of relief at the full hearing. Appropriate arrangements could be put in place in the interim to protect the public; that was necessary given that the applicant had accepted the disqualification on the basis that he, as sole director, had fallen under the influence of a third party in the management and administration of his companies. Public protection might require the appointment of new accountants and auditors of national standing to oversee the arrangements of the web of interrelated companies, which used an organisational structure that took advantage of small-company exemptions from auditing standards. It was also likely to involve appointing an additional board member to each company, such as an independent professional with no previous involvement in the applicant’s or his father’s ventures.

 

(2) The court granted the interim relief for three months. That allowed the applicant time to supplement the evidence filed and answer the criticisms raised by the secretary of state, in particular with respect to the inadequacy of the underlying financial information. It was also time for him to review the true necessity of his being the director of each and every company, or whether a differently constituted board, with him as a consultant, might suffice. He could also put in place accounting and auditing arrangements so as to give the court confidence in proper control being maintained over the two principal development companies.

 

Application granted

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