Crime Solicitors

The directors of a hairdressing company which later traded as an insolvency practice have been disqualified for failing to run a company in a competent manner.

Lee Anthony Pitchford and Jason Pollard were directors of Baker Donald Ltd.

The company was incorporated in November 2011 as a hairdresser.

However, in March 2012 it began trading as an insolvency practice, providing general corporate insolvency advice and referring 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 also 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 11 February 2014, the Secretary of State for Business, Innovation & Skills, issued a public interest winding up petition against the company, on the grounds that the company was issuing misleading marketing letters, failing to properly deal with monies 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 had 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 30 November 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 the work which it was claimed had been 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.

Investigators also found that, 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 monies due.

Baker Donald did not properly and appropriately deal with the sums of money it had received through its trading practices – and had failed, either deliberately or through its poor record keeping, to properly segregate money due to clients, third parties and itself, investigators concluded.

As a result, the Secretary of State concluded that Baker Donald had taken money in relation to its own fees, which ought to have been paid to third parties.

Baker Donald’s global client account was also used as an informal unregulated banking facility with no consistency as to the level of fees charged for its use, the investigation found.

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 had also issued misleading marketing documents as to its full and true charges – and had issued marketing letters to companies in financial difficulties, offering its services for £495, the investigation concluded.

Records produced show that Baker Donald’s fees exceeded 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.

At the time of Liquidation the Official Receiver was unable to establish an accurate figure for Baker Donald’s assets – and liabilities were estimated to be £60,572.

Chief Investigator at the Insolvency Service, Cheryl Lambert, 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.”

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