New Ruling on Responsibilities of Directors From Supreme Court

The Supreme Court handed down its judgment in the case of Jetiva SA and another v Bilta (UK) Ltd and others, which has been long awaited by anyone connected to insolvency. All seven judges in the Supreme Court ruled that any director who commits a crime, such as fraud or theft, cannot blame it on the company and get away without criminal responsibility.

This case centred on a complex business fraud called VAT Carousel Fraud. This fraud involves a number of different companies, including one from the UK who is register for VAT. This company will buy products from a business in the EU and these products are zero rated for VAT due to European Union agreements on these types of business transactions.

However, once company has purchased these products at zero VAT, they will sell them onto another company in the UK but add on 20 per cent VAT.

In this particular case, Bilta became insolvent and was wound up by HMRC. The liquidators of Bilta accused the directors of damaging the company through VAT fraud and that Jetiva SA and its directors were complicit in the fraud and brought proceedings against all of them.

Whilst the directors suggested that they could not be held responsibly individually for the liabilities of the company’s creditors, the Supreme Court disagreed. Whilst the principle that the acts of a company director could be credited to the company and not them, that was not always the case. Where there was criminal activity, these actions would not be attributed to the company and the directors themselves would be liable.

This means that anyone connected to a business as a director can be sued for any liabilities of their business if they are engaged with criminal activities under the guise of their business.

If you would like to know more about how this new ruling will affect you and your business, please contact us to discuss this further. You can contact our insolvency team on 020 7490 5861 or email us on info@vlcw.com and we’ll be happy to help.