IN A LANDMARK RULING the High Court has disqualified an insolvency practitioner for 12 years because of his actions while liquidating a business.
The case was brought against Kirankumar Mistry by two Grant Thornton partners Nicholas Wood and James Earp.
Mistry was found to have diverted funds out of companies where he was acting as a liquidator and then to have paid the bulk of those funds to a Mauritian company which he owned.
Wood and Earp were appointed joint liquidators over 44 companies, in which Mistry was originally appointed, where they made the discovery.
Mistry was appointed liquidator to Safe Solutions Accounting Limited and Safe Solutions Accounting Services. The Safe Solutions companies masterminded a tax fraud which deprived HMRC of about £41m in unpaid taxes. While liquidator Mistry transferred funds to Independent Insolvency Advisory Services (IIAS) for no apparent reason, which was owned by Goddards accountant Derek Williamson. Goddards' principal was involved in the tax fraud at Safe Solutions.
IIAS then transferred the funds to Dreamcast which was incorporated in Mauritius and that Mistry wholly owned and controlled.
The Grant Thornton partners were appointed administrators and latterly liquidators of the Safe Solutions companies.
Louise Bell, corporate recovery partner at law firm Gateley, which represented the liquidators, said: "This is an important decision and one that should send a clear warning signal to anyone else in the profession who is engaged in conduct similar to that of Mr Mistry.
"Increasingly, successor practitioners are examining the conduct of their predecessors and it is now clear that very serious consequences can result if there is evidence of practitioners acting improperly."
Presiding judge Mr Justice Newey found in the public interest that Mistry should be disqualified from acting as an insolvency practitioner or a director of a company for 12 years starting 31 July.
HMRC as a creditor in almost all insolvencies wanted to ensure that an insolvency practitioner who was removing funds from insolvent companies for his own benefit would be disqualified for as long as possible.
Grant Thornton partner Nicholas Wood said: "This disqualification order is in the interests of the public as well as the profession as a whole. Practitioners like Mr Mistry who act dishonestly should be disqualified. In similar cases of dishonesty in the past we have seen practitioners who have lost their licences continuing to offer their services to the public as directors of companies. As a result of this order, Mr Mistry will be prevented from doing that."
This is the first successful case where proceedings have been brought against a liquidator.
This reads as fraud. Are there any criminal proceedings pending? A 12 year disqualification seems little more than a slap on the wrists.
Posted by: Andrew Bolton, 19 Jul 2012 | 09:55
Can anyone tell us if moving funds to a wholly owned company is theft ?
Posted by: Frank Syratt, 19 Jul 2012 | 12:34
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