Francis Oluwafisayo Falodun v The Secretary of State for Business, Energy and Industrial Strategy

This was an application for permission under section 17 of the Company Directors Disqualification Act 1986 to act as a director of V1CE Limited despite having given a disqualification undertaking arising from failures to keep adequate accounting records in breach of section 386 Companies Act 2006 (and the related criminal provision in section 387). The court applied the established balancing approach (including guidance in Rwamba) weighing the company’s asserted need for the applicant against the protective and deterrent purposes of disqualification.

The judge concluded that the applicant had failed to disclose material matters and had not explained or remedied the Defendants’ Particulars (including large unexplained payments, VAT/PAYE and directors’ loan uncertainties). Crucially, the applicant failed to disclose that the proposed safeguard bookkeeper/director (Mr McDonald) had been Switch Leisure Limited’s bookkeeper at the time of the record-keeping failures. That non-disclosure, together with persistence of numerous "Missing Topics" in the evidence, meant the court could not be satisfied on the balance of probability that permission would not risk the public or undermine deterrence. The application was refused.

The applicant, Mr Falodun, sought permission to be a director of V1CE Limited for the remaining period of a five-year disqualification undertaking (effective 19 April 2022 to 18 April 2027) given after accepting grounds of unfitness arising from failures to ensure Switch Leisure Limited maintained adequate accounting records under section 386 Companies Act 2006. The particulars included absence of till receipts and sales records, missing purchase invoices and expense receipts, unexplained intercompany payments, uncertainty as to directors' loan accounts and VAT and PAYE liabilities, and an inability to determine the cause of the company’s failure.

The factual evidence comprised three affidavits from the applicant and affidavits from V1CE’s sole director (his brother) and the company bookkeeper (Mr McDonald). The applicant relied on the success of V1CE Limited, the presence of an experienced internal bookkeeper and external accountants, and a draft order of conditions intended to secure compliance with section 386 as the basis for permission.

• Nature of application: permission under section 17 CDDA 1986 to act as a director despite disqualification.
• Issues framed: (i) whether the applicant had discharged the onus to satisfy the court it was appropriate to grant leave; (ii) whether the risk of recurrence of the misconduct was acceptably mitigated by evidence and proposed conditions; (iii) whether there had been full and candid disclosure of material matters relevant to that assessment.

The court analysed the evidence and law (including guidance in Rwamba and authorities on the proper exercise of the section 17 discretion). Key findings were (i) important non-disclosure by the applicant and witnesses: notably the failure to disclose that Mr McDonald had been Switch’s bookkeeper when record-keeping failures occurred, (ii) persistent omission of explanations for the "Missing Topics" identified in the disqualification particulars (large unexplained payments, intercompany transactions, uncertainty as to VAT/PAYE and directors’ loans), and (iii) inadequacy of the proposed conditions to remove the risk given the non-disclosure and the fact accountants are not involved in day-to-day management.

Balancing the strong argument of the company’s need and current compliance against the duty to protect the public and the deterrent purpose of disqualification, the judge concluded the burden was not discharged and refused the application. The judgment emphasised the duty of candour in such applications and the possibility of a renewed application if full disclosure and satisfactory evidence and conditions were presented.

The application for permission to act as a director was refused. The court held that the applicant had not discharged the burden of proving on the balance of probability that permission would not present a risk to the public or undermine the deterrent purpose of disqualification. This conclusion rested on serious non-disclosure (in particular, failure to disclose that the proposed safeguard bookkeeper had been the bookkeeper of the insolvent company when the accounting failures occurred), the absence of satisfactory explanations for a number of material deficiencies identified in the disqualification particulars, and inadequacy of the proposed conditions to allay the court’s concerns.