Company Director Automatically Banned From Running New Company

In one of the first incidence of its kind, a company director has felt the immediate impact of an automatic ban preventing him running a company.

In April this year Hugh James Bevan Lloyd was sentenced in the Auckland District Court to 6 months home detention after a successful prosecution by Inland Revenue.

He was charged with aiding and abetting Scanlan IT Staff Ltd to take PAYE and other deductions from employee wages, but not paying those deductions to Inland Revenue as required.

It was a fairly straightforward and typical prosecution of its type, but the difference is that in other recent similar court cases, the directors couldn’t run a new business because they were either bankrupt or in prison.

This is the first case that IR knows of where a director, when convicted and sentenced on tax charges, has looked to carry on trading a new company while serving a home detention sentence.

The law was changed in 2019 to allow the automatic ban but most people wouldn’t know they could be stopped from being a director because of tax offending. It’s the first case where the prohibition has had a chance to really bite.

Lloyd was banned from running a new company under section 382(1)(ba) of the Companies Act 1993. That prohibition lasts for 5 years.

The more Inland Revenue does these types of prosecutions, the more common this automatic ban will become.

Details of the Offending

Lloyd was the sole director and beneficial owner of an executive recruitment industry company.

The company was required to pay PAYE by the 20th of the month but for 20 months, from October 2020 to May 2022, the company deducted PAYE (and things like student loan repayments and KiwiSaver contributions) from employees’ wages but didn’t pass that on to IR.

The total involved was $559,751.64. About half of that total has been repaid.

The company was placed into liquidation in June 2022.

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