Sin Bin: Oil and gas consultancy director disqualified for six years over failure to pay taxes

The sole director of a company which provided consultancy services to the oil and gas industry has been disqualified for a period of six years over his failure to pay tax. A judge in the Court of Session ruled that Russell Stewart, who was the director of Rusler Engineering Limited, was “unfit to be concerned in the management of a company” after he failed to make payments amounting to more than £120,000 to HM Revenue and Customs (HMRC). The court heard that Mr Stewart was sole director of the company from March 2006 until it went into liquidation in August 2013, when the Advocate General for Scotland on behalf of HMRC petitioned the Court of Session for the company to be wound up on the ground that it was unable to pay its debts. The court was told that the liquidator received claims from creditors amounting to a total of £144,965.98, of which £128,794.52 was a claim by HMRC, and the remaining claim of £16,171.46 was by HSBC Bank, the company’s bankers. The company had a statutory duty to account to HMRC on a monthly basis for Pay As You Earn income tax (PAYE) and National Insurance Contributions (NIC) due in respect of employee earnings paid by the company. It also had duties to account to HMRC for Corporation Tax (CT) and Value Added Tax (VAT). In the period between April 2011 until the date of the liquidation the company was obliged to make payments to HMRC in respect of PAYE, NIC, CT and VAT, and associated penalties, totalling £177,602.16, but payments of only £50,470.85 were made. The court also heard that during the period that substantial liabilities to HMRC had accrued and were accruing the company generated “more than enough funds” to meet those liabilities but “chose not to meet them”. Between January 2012 and the date of liquidation a total of £351,635.02 was paid into the company’s bank account and £419,070 was withdrawn, of which £307,159 was paid directly to the respondent in dividends and wages, but only £26,727.58 was paid to HMRC. The Department for Business, Innovation and Skills, sought a disqualification order in terms of section 6 of the Company Directors Disqualification Act 1986 for Mr Stewart, who did not oppose the application or lodge answers. The judge noted that the company was a “one-man company” under the “complete control” of the respondent. “He cannot but have been well aware of the company’s obligations to HMRC,” Lord Doherty said. The judge also observed that HMRC had issued “several reminders” to the company by letter and by telephone seeking payment of the sums due to it, but the respondent “chose not to pay the sums which were due”. In a written opinion, Lord Doherty said: “This was not a case where the sums owing were retained within the company in order to allow it to continue trading. The respondent decided to take very large dividends which could not be justified having regard to the company’s outstanding liabilities. “In proceeding as he did he must have been fully aware that he was acting to the prejudice of the company’s creditors, including HMRC, by removing large sums of money from the company which on any responsible view ought to have been used to meet its very significant liabilities. “In the whole circumstances I have no hesitation in concluding the respondent’s conduct as a director of the company makes him unfit to be concerned in the management of a company; and that it is expedient in the public interest that a disqualification order should be made.” The remaining issue was the appropriate period of disqualification, and, having considered the submissions together with the petition, the productions and the authorities to which he was referred, the judge concluded that a disqualification of less than six years “would fail to mark adequately the seriousness of the case”. Lord Doherty added: “Accordingly, I shall grant the prayer of the petition, order that the respondent be disqualified for a period of six years, and find him liable to the petitioner in the expenses of the application.”