Rio Property Maintenance Limited, Re

Under the Company Directors Disqualification Act 1986, materially overstating turnover in a Bounce-Back Loan application may constitute misconduct and unfitness where the conduct falls far below the standards required of directors. Gross negligence or marked incompetence can establish unfitness without dishonesty or personal benefit, provided the defendant had fair notice of the substance of the allegation. Disqualification periods are fact-sensitive: statutory brackets guide but do not dictate the result. A compensation order may follow where the conduct directly causes creditor loss; impecuniosity alone does not defeat the discretion. A 10-year disqualification and compensation order were made.

The Secretary of State brought an unopposed first-instance claim against Enilson Antonio Vieira Da Silva under sections 6 and 15A of the Company Directors Disqualification Act 1986. The claim concerned a £50,000 Bounce-Back Loan application for Rio Property Maintenance Limited stating 2019 turnover of £202,321, although the evidence showed a materially lower figure. The defendant was debarred from contesting the claim after failing to comply with an unless order and did not attend. The issues were whether the overstatement amounted to misconduct and unfitness, whether the supporting affirmation gave fair notice of gross negligence or incompetence, what period of disqualification was appropriate, and whether the conduct caused compensable creditor loss.

1. Disqualification and unfitness. The statutory requirements under section 6 of the Company Directors Disqualification Act 1986 were satisfied. Applying the three-stage approach in Re Structural Concrete Ltd [2001] BCC 578, the court considered misconduct, unfitness and the appropriate period of disqualification.
2. The defendant must have understood the turnover question and its significance. The stated turnover materially exceeded the company’s actual turnover, and he had recently approved accounts showing substantially lower figures. His conduct was, at the least, grossly negligent or incompetent in a very marked degree. The supporting affirmation had to be read as a whole. It gave fair notice that the allegation was a material overstatement which displayed serious negligence or incompetence. The fair-notice authorities did not impose the inflexibility of a criminal indictment.
3. The misrepresentation constituted misconduct and rendered the defendant unfit. The Bounce-Back Loan Scheme depended on accurate self-certified information and operated during a national emergency. The defendant breached the trust placed in directors and materially increased the taxpayer’s exposure. Dishonesty, personal benefit or knowing misconduct was not an essential prerequisite.
4. The period was discretionary. The statutory two-to-15-year range and the three brackets in Re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164 were guides, not automatic tariffs. The court rejected any requirement that serious conduct could attract a middle-bracket period only if the supporting affidavit expressly stated that it was serious. The absence of dishonesty did not make a lower-bracket period inevitable. Given the serious overstatement, the maximum loan, the national-emergency context, lack of explanation and absence of mitigation, the appropriate period was 10 years.
5. For compensation, the conduct directly caused the creditor’s loss. The threshold under section 15A(3) was met, and impecuniosity did not require the claim to be refused. Having regard to the amount of loss, the nature of the misconduct and the absence of any contribution, the court ordered compensation of £18,531 plus interest at 2.5% from 8 July 2020 to 29 June 2026, recorded as £21,299.88 inclusive of interest. Costs of £5,573.01 were also ordered.