Two company directors in Manchester have been sentenced to 21 months’ imprisonment each by Chester Crown Court for fraudulent trading at their debt solution company, Churchwood Corporate Services Limited (CCSL).

Benjamin Humphreys and Daniel Moore, were both also banned from acting as directors of a limited company for seven years.

The convictions follow an initial investigation by the Official Receiver’s Office, Newcastle-Under-Lyme and an investigation and prosecution by the Department for Business, Innovation and Skills (BIS).

Both directors pleaded guilty to fraudulent trading and misconduct in the course of winding up when they appeared at court on 26 July 2011. However, for legal reasons the sentencing hearing was adjourned until 16 May 2012.

The court heard that between 2004 and 2006, Humphreys and Moore ran Churchwood Corporate Services Ltd from an office in Alderley Edge, Cheshire. They targeted companies who had been served with a winding-up petition from HM Revenue and Customs (HC).

The defendants persuaded the companies to sign up as clients, promising the owners and directors that CCSL would negotiate with HC for a delay in the winding-up proceedings. Instead of assisting them however, Humphreys and Moore took the client companies’ money and used it to fund their expensive lifestyle.

Both of the defendants spent clients’ money on holidays, and at restaurants and off-licences. In addition, Daniel Moore used clients’ money for flying lessons and Benjamin Humphreys used it to support his significant on-line gambling activities.

Humphreys and Moore also charged the corporate clients 17.5 % VAT on all invoices, despite the fact that CCSL was never registered for VAT with HC. When CCSL was itself wound-up in 2006, the two directors provided the Official Receiver with ‘doctored’ client invoices to disguise the fact that they had fraudulently charged their clients VAT.

As a result of the dishonest trading, three client companies, all successful businesses albeit with cash flow problems, went into liquidation.

Michael Williams, deputy chief investigation officer, Department for Business (BIS), said: “Through their company Humphreys and Moore purported to give assistance, and therefore hope, to the directors of failing companies. However they did the exact opposite. By using the money held on trust by them to live the ‘good life’ they put those companies in a far worse situation, losing money they could ill afford. This is a disturbing and callous part of the case.

“The offence is a very serious abuse of the privilege of running a limited liability company. The Department will fully investigate such abuse and take robust action to protect corporate governance, which is at the heart of business activity in this country.”