Ken Bates and his solicitor, Mark Taylor, may have breached insolvency law by acting as directors of Leeds United Football Club Limited, the new company formed to buy the club out of administration, according to HM Revenue and Customs.
The Guardian has learned that one of the grounds for HMRC's challenge to the Company Voluntary Arrangement which originally approved the sale by the administrators, KPMG, to the new company, was that Bates and Taylor did not have permission from a court to be directors. HMRC believed permission is required because both men were previously directors of a different company, also called Leeds United Football Club Limited, which went into liquidation in June 2006.

According to s216 of the Insolvency Act 1986, anybody who has been a director of a company which has gone into liquidation must obtain the court's permission if he wants to be a director of a new company with a similar name within five years. Trading without obtaining that permission is a criminal offence and anyone prosecuted and found guilty of it is, according to the act, liable to a fine or imprisonment.
KPMG has said it believes an application has been made to the court on behalf of Bates and Taylor but the Insolvency Service, which would be invited to respond to any application, said yesterday it had no notice of one, although there could be a delay in being informed by a court.

The question of whether s216 has been satisfied arises from the original company, Leeds United Football Club Limited, of which Bates and Taylor were directors. It changed its name, to Romans Heavies Limited, on December 2 2005, then on June 6 2006 went into liquidation. As Bates and Taylor had both been directors of the company during the 12 months preceding the liquidation, s216 appears to apply, requiring the court's permission for them to be directors of any company with a similar name within five years. HMRC is understood to have argued in its legal challenge to the Leeds United CVA that Taylor and Bates were in breach of s216 because the court's permission had not been granted.

Neither Taylor nor Bates responded to questions about the alleged breach, so it is not known whether they have omitted to make an application or consider that it is not necessary for them to do so.


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