A recent investigation by the Insolvency Service resulted in the sole director of a Leicester clothing manufacturer being jailed for six months after failing to provide adequate company accounting records.

The investigation found that the defendant had not kept adequate accounting records which meant the liquidator could not ascertain where cheque and debit card withdrawals totalling more than £983,000 had been spent.

In addition, the company failed to pay tax liabilities of more than £300,000. This partly related to National Insurance and PAYE payments after it was found the director was taking contributions from employees without passing them on.

As well as the prison sentence, the defendant has been banned from being a company director for a period of five years. The disqualification means that the director cannot be involved, directly or indirectly, in the formation, promotion or management of a company without permission of the court for five years.

This case serves as an important reminder that a company director must ensure that they meet their responsibilities. Directors are duty-bound to keep adequate records to demonstrate their company’s financial position and to prepare accounts.