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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3493
Experience:  Solicitors 2 years plus PQE
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I am a director of a company. I had works done on a new house

Customer Question

I am a director of a company. I had works done on a new house that and I did not intend to pay for all the work. This was later raised when an employee raised this in whistle blowing and I repaid the money to the company in full. What is my legal (criminal) position?
Submitted: 1 year ago.
Category: Law
Expert:  Alex J. replied 1 year ago.
Alex J. :

Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you.

Alex J. :

Who are the shareholders of the company?

Alex J. :

Why did you not intend to repay it? Was this is anyway tacitly approved by the board?

JACUSTOMER-tw8k0eao- :

Thank you AJ.

JACUSTOMER-tw8k0eao- :

It is a listed company (London Stock Exchange).

JACUSTOMER-tw8k0eao- :

I contracted to purchase a flat for £10.5 million. It is a new build flat and is being built by the company. I am the chairman of the company. I received shareholder approval.

Alex J. :

Hi, Thank you. Were the payments in anyway approved by the boarD?

Alex J. :

Hi, Thank you.

Alex J. :

If you received shareholder approval there is not going to be any criminal liability.

Alex J. :

It is possible that you may have had to notify this as a benefit under listing rules but the fact that the transaction was approved, the money repaid anyway there is no fraud or theft here.

JACUSTOMER-tw8k0eao- :

I subsequently instructed the company to do £1.4 million of additional work to the flat (including dressing the flat and supplying artwork and furniture). Of this I was intending to pay £600k and expected the company to write off £800k. I did not have shareholder approval or board approval for this transaction.

Alex J. :

The only sanction you could face is a potential director disqualification, but again this is for worst case scenarios of theft and where a company goes insolvent.

Alex J. :

OK that is slightly different.

Alex J. :

What gave you the expectation that the £800k would be written off?

Alex J. :

Did you make any attempt to conceal it?

JACUSTOMER-tw8k0eao- :

The issue was raised by a whistleblower and I disclosed this the board and made the payment in full on completion of the flat.

Alex J. :

Hi, Thank you - when you retrospectively disclosed it to the board, did they approve your disclosure and accept the repayment?

JACUSTOMER-tw8k0eao- :

By attempt to conceal it, I did not obtain consent from the board which would have been normal. The £800k was going to be written off on my instructions.

Alex J. :

S.183 of the Companies Act 2006 states that you could face a fine.

Alex J. :

But if the act has now been ratified and the money repaid, I would say that criminal is still unlikely.

JACUSTOMER-tw8k0eao- :

Is this covered under the Fraud Act? Abuse of Position?

Alex J. :

If the matter is not public this would cause embarassment for the LLP.

Alex J. :

* For the Listed Company.

Alex J. :

It is covered by a duty to declare an interest in proposed transactions under S.177 of the Companies Act

JACUSTOMER-tw8k0eao- :

It is the intent to defraud that I am concerned about re:criminality. This is in writing and there is evidence about intent.

Alex J. :

and a duty not to personally benefit or act in conflict under S.175

Alex J. :

Fraud cases are very difficult to prove and expensive. Ask yourself - you have repaid the money - is it in the public interest to prosecute you.

Alex J. :

When you disclosed this to the board what was their response?

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