Closer to Discovering Why Craig Whyte was Disqualified from being a Director?

Phil Mac Giolla Bhain posted earlier about the Rangers declaration to the PLUS SX regarding Mr Craig Whyte’s disqualification. As is usually the case on his blog, there was much detail behind the matter on which he was speculating – Mr Whyte’s disqualification.

It has not been easy to pin down what Mr Whyte actually did to earn his seven year disqualification. He has referred to it as being due to a “technicality”.

I penned some thoughts about what the extent of the “technicality” might be.

Phil’s post tried to ascertain exactly which company the disqualification related to, and it was suggested that possibly it was not in connection with Vital UK Ltd, Company Number 02919664. This company was incorporated in 1994 and dissolved in 2003. As a Liquidator ran the company from appointment in November 1995 until dissolution, at first sight it seemed unlikely that it was this company at the root of Mr Whyte’s problems. The records I saw did not disclose him as having been a director (in fact the records I saw identified none of them. It seemed less likely, in view of the matters below, that the affairs of a company which only existed, pre liquidation, for 18 months, could have led to a disqualification being imposed almost 4 years later

Mr Whyte however was definitely a director of Vital Plant Services Ltd, Company Number 03122782 – dissolved as of 29th Jan 2002; Vital Holdings Ltd, Company Number 03099824 – dissolved as of 26th Apr 2005 and Vital Security Ltd., Company Number 03122730 – dissolved as of 18th Apr 2000.

As Phil indicated, all three of those companies had Craig Whyte and Kenneth McLeod, the accountant discussed by the BBC, as directors. In addition Vital Security had as a director Kevin Sykes, the convicted fraudster. There are two Kevin Gordon Sykes listed on the register of Disqualified Directors.

One was disqualified on 5^th April 2001 until 4^th April 2016 under section 6 of the Company Directors Disqualification Act 1996. This relates to disqualification of unfit directors of insolvent companies.

The ban for the other Mr Sykes (or the second disqualification for the same man) runs from 2nd November 2005 until 1^st November 2020 and is under section 2, which deals with convictions for indictable offences.

All of the above, and the apparent time line, might have suggested that it was in fact Vital Security where Mr Whyte’s disqualification stemmed from. It was that company’s employees who were referred to in the BBC programme as having not been paid wages when the company failed. All of the above seemed entirely credible and hung together to my eyes.

One of the wise posters “sorrynocando” on the Rangers Tax Case Blog suggested that in fact it was Vital UK Ltd from which the disqualification stemmed.

Therefore I had a bit more of a look at that company.

Vital UK Limited was incorporated on 15^th April 1994 as Vital (UK) Ltd. The name changed to Vital UK Ltd (the brackets having been removed) on 31^st August 1994.

On 27^th October 1995, the company passed a special resolution resolving that it should be wound up. The resolution was signed by a “David Anderson”. This was a voluntary liquidation by the members of the company, and as such a Declaration of Solvency (a Form 4.70) had to be completed. The Declaration must:-

• be based on a full inquiry into the company’s affairs;
• state that all debts and interest can be paid within 12 months;
• include an up-to-date statement of the company’s assets and liabilities; and
• be made by the majority of directors of a company no more than five weeks before the passing of a resolution for voluntary winding-up of a company.

It is a criminal offence to make a declaration of solvency without reasonable grounds.

I have not been able to access the Declaration of Solvency.

The liquidator was appointed with immediate effect and the relevant papers were received at Companies House on the 2^nd November 1995.

The London Gazette of 7^th November 1995 reported the appointment of the liquidator. The company was described as a “Dealer in all goods”. The same edition of the Gazette also reported the passing of the Special Resolution.

Vital UK Ltd (in liquidation) then lingered on for far longer than it had existed as a solvent company. The liquidation continued until, finally, the Company was dissolved in 2003.

The liquidator prepared a statement of affairs detailing the financial position of the company as at 25^th October 1996 and produced the statement on 6^th November 1996. The liquidator noted that the company would not, despite the terms of the Declaration of Solvency, pay its debts within the required period of one year (which was by this point about to expire).

This disclosed the following:-

The only assets were Bills Receivable with a Book Value of £649,139 but an estimated sum recoverable of only £100,000.

The preferential creditors were as follows; VAT £33,039; PAYE + NIC £279,976.

The estimated trade creditors totalled £66,674.

There was £2 of issued share capital and therefore an estimated shortfall for members of £279,691.

Listed in the creditors is a balance of £40,042 owed to Custom Cleaning Services of Wishart Street in Glasgow. A quick search of Companies House shows that “Custom Cleaning Services Ltd” changed its name in 1996 to CCS 1996 Ltd. This company was wound up in 1998. Amongst its directors were David Anderson, who had signed the Special Resolution to wind up Vital UK Ltd, Craig Whyte and Kenneth McLeod.

So where does this take us? Are we any nearer to working out why Mr Whyte received a seven year ban?

Vital UK Ltd had a liquidator appointed on the basis that it could pay its debts. The directors, or at least a majority thereof, put their names to the Declaration of Solvency.

However, once the liquidator discovered that less than one sixth of the bills receivable were likely to be recovered, this made it clear that the debts would not be paid. At that stage the tax man was a preferential creditor, but even he was not getting anything near what he was due.

In fact, bearing in mind the length of the liquidation (and subject to looking at the liquidator’s income and expenditure accounts) I suspect the tax man got back little or nothing. The cost of a liquidation running nearly 7 years would be enormous normally.

On the information available therefore the issues seem to be (a) was the Declaration of Insolvency filled in falsely and (b) why were the bills receivable in the books so far above what the liquidator thought could be recovered.

Both factors could, for example, have been as a result of a major debtor failing, and indeed the London Gazette records an application by Vital UK Ltd to wind up another company.

But such an event would not normally lead to a disqualification of a director.

One wonders too how a cleaning business based in Glasgow came to be owed £40,000 by a company based in Essex. Could there have been an issue here which brought the attention of the Insolvency Service to bear?

Mr Whyte has it in his power to explain what he was disqualified for. Is his fear that the reasons are actually worse than people are imagining? Maybe one day he will tell us.