Four years for records after the Bounce Back allegation failed
The court rejected loan misuse, yet a disputed £432,056.23 claim and missing invoices still cost a director four years.
On 9 October 2026, ICC Judge Agnello KC disqualified Gareth David Gwynne Davies for four years. The High Court rejected the Secretary of State's allegation that he had used his company's £50,000 Bounce Back Loan other than for its benefit. It upheld a narrower finding that he had failed to keep adequate records of expenditure and liabilities. Davies, a chef and the sole shareholder of Orange Tree Sawbridgeworth Limited, represented himself at the hearing on 21 July 2026.
The company began trading in April 2019 and entered creditors' voluntary liquidation (CVL) on 15 June 2021. The Secretary of State issued the disqualification claim on 22 June 2023. Davies ran The Orange Tree pub and restaurant in Sawbridgeworth. Restrictions stopped that trade. He set up a farm shop as the company's business. The judge accepted that he was trying to keep the business alive during Covid, and that the loan enabled the farm shop to be constructed and operated. Bank credits from merchant services providers and other contemporaneous evidence supported that account. The farm shop was the company's business. That is a judicial finding, not a story told after the event.
The company received the £50,000 Bounce Back Loan on 18 May 2020. On 1 June 2020, £35,000 left the company's Barclays account for Davies's personal Lloyds account. £2,000 was returned at once. £33,000 went to his savings account. The Secretary of State said there was insufficient evidence that the remaining sum had benefited the company. Davies said he used it principally to establish the farm shop. The judge accepted his evidence on the loan and found him overall truthful on that issue. Payments to company suppliers, his explanations and the company's bank entries supported him. Business payments exceeding £33,000 had been made from the Lloyds account. More had returned from savings than had been transferred into it. She rejected the idea that he had to trace the precise loan pounds through the accounts. The misuse allegation failed. This ban is not a punishment for diverting the loan.
The records case was separate, and it is the one that stuck. Section 386 of the Companies Act 2006 requires adequate accounting records. They must show and explain the company's transactions, disclose its financial position with reasonable accuracy at any time, and enable accounts to be prepared that comply with the Act. The judge said the section does not itself require management accounts. Records serve directors who have to decide whether to keep trading, and insolvency practitioners who later try to identify and recover assets.
Davies said he sent hard-copy invoices to the company's accountants, Digitally, after finding it too time-consuming to scan them. He said 139 invoices had been uploaded to Dext. He also relied on bank statements and the Clover cloud-based till system, which he said recorded receipts and was accessible to the accountants. He believed the accountants were responsible for the invoices and for preparing the accounts. The judge accepted that he had sent at least some invoices. She was not satisfied that he had sent all of them. There was no accountant's evidence establishing what Digitally had received, or that there was an agreement to retain and upload the invoices. The duty sits with the company. A director cannot prove compliance simply by pointing at the accountant. Because the Lloyds account mixed personal and business payments, invoices or an equivalent record were needed to identify company expenditure without relying on his memory. On that narrower basis, the records were inadequate.
The court did not accept the Secretary of State's case in full. Bank statements and Clover till receipts provided an accurate record of money received, including cash receipts. The judge criticised the treatment of Clover in the evidence. She described the liquidator's email as vague and unclear. The available material did not establish the VAT liability in the amount suggested by the Secretary of State. That is not a finding that no VAT was owed. Missing invoices made the tax position difficult to determine. Those are the judge's findings. They should not be stretched into a claim that HMRC's figure was invented, or that nothing was due.
A separate dispute sat beside the disqualification. The liquidator had claimed a director's loan account (money a director owes the company, or the company owes the director) of £432,056.23 and obtained a bankruptcy order on that basis. Davies disputed the debt. The judge said it appeared that his application to annul the bankruptcy order had succeeded after the disqualification hearing. The Secretary of State no longer relied on an allegation that the records were insufficient to establish the amount due to or from Davies. This judgment does not determine that the £432,056.23 was payable. A bankruptcy order was made on a claim this court has not established. That is a serious consequence to hang on a figure that remains in dispute.
On proportionality, the judge found a lack of care. She did not find intentional or reckless failure. The Secretary of State had not put the case on either basis. She accepted that Davies was doing his best during Covid. She distinguished his case from one where no meaningful records, and no means of reconstructing the position, existed. In her view, a meeting between Davies and the liquidator or the accountant could have established the financial position with relative accuracy. The judgment records no evidence that the liquidator met him to work through the entries.
Counsel for the Secretary of State submitted that six years was appropriate for the records failure even if the loan allegation failed. The judge placed the case in the lower bracket and selected four years. Section 6 of the Company Directors Disqualification Act 1986 makes an order mandatory once the court is satisfied that a director of an insolvent company is unfit. The statutory range is two to fifteen years. The judgment sets out reasons for the lower bracket. It does not separately explain why four years was chosen over the two-year minimum. Four years is a judicial decision. The absence of a distinct explanation for rejecting the minimum is a fair point to press, not a finding that the order was unlawful.
The judgment does not state the start date of the disqualification. It does not give a final determination of the disputed director's loan. It does not disclose the liquidator's remuneration. Scotland and Northern Ireland have their own insolvency rules; this is an English High Court order under the Company Directors Disqualification Act 1986.
The lesson
If you are reading this at the kitchen table, the point is not that records are a technicality. The point is who chose not to sit down with the man who had them. The judge found that a meeting with Davies could have established the financial position with relative accuracy. There is no evidence in the judgment that the liquidator did that before a £432,056.23 claim produced a bankruptcy order, and before the state asked for six years on records alone. The loan allegation failed. The suggested VAT figure was not established. The debt this judgment does not decide was still used to bankrupt him. That is an institutional failure of proportion, and it is fair to say so. It is not a finding that the records duty did not exist.
The first person who tells you your records are a problem will often be the person who profits if the company goes into a formal procedure. Adequate records identify assets and liabilities. Creditors need that. So does anyone later asked to reconstruct a director's loan account from a mixed personal account. What you do not have to accept is that the only version of the books is the liquidator's email, described here as vague and unclear, or a VAT figure the court would not adopt. HMRC is a creditor with rules. A figure that has not been established is not a bill you have to treat as final.
This week, pull together every invoice you still hold, the bank statements for every account that touched company money, and the till records, including anything sitting in a system like Clover or an upload tool like Dext. Ask your accountant, in writing, what they received, what they agreed to keep, and what they will confirm to a liquidator or to the Insolvency Service. Keep their reply. If a disqualification letter arrives, it should identify the alleged unfit conduct and explain how to respond. You can defend the court proceedings or offer an undertaking. Either way, take advice from someone who is not paid by the procedure being recommended, and do it before you answer. The same applies to any personal debt claim, including a director's loan account or a call on a personal guarantee. Dispute what you dispute, in writing, and do not assume a bankruptcy order has decided the figure.
Formal insolvency is sometimes the right choice. It is not a sentence, and a records failure that was neither intentional nor reckless is not the same as diverting a Bounce Back Loan. The state lost that allegation and still sought six years. You cannot control what they ask for. You can make sure the invoices, the bank entries and the written instructions exist before anyone else writes the story of your company.
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