Data-breached Guntrader website calls in liquidators, is reborn as Guntrader 2 Ltd A British firearms sales website's owner has called in the liquidators as his company faces data breach lawsuits – while continuing to trade from a newly incorporated business. Guntrader Ltd entered a creditors' voluntary liquidation on 22 October. Its director, Viscount Alexander Andover, was appointed on 21 October as the …
Means the owners can't be sued personally for losses sustained by the company. But this shutdown due to anticipated losses seems more like "owners raid the corporation for every penny and other assets that aren't nailed down then enter liquidation immediately after" which is NOT how limited liability is supposed to work.
In practice they often get away with it, because they can act like they didn't know the company was going to go under. That claim is a lot harder to make when they admit it in a public Facebook post though.
I wouldn't be surprised if a lawsuit is filed against the owners to claw back any type of dividend or other distribution of funds made shortly before they enter liquidation. That lawsuit might possibly be successful based on their rather stupid Bond villain practice of describing their plan in detail!
Limited Liability constrains the liablities of the SHAREHOLDERS ONLY
It does NOT constrain the liabilities of the _directors_ or the _managers_ (frequently the same people) for poor decisions or reckless operations
The liquidation is allowed to be contested for cases like this and the ICO should have already done so
As the previous poster has stated, what was posted on Facebook amounts to sufficient evidence for "piercing the corporate veil" and essentially destroys all protection the new and old owner(s) may claim
A company is just of a group of people who have come together for a common purpose. Much like a street gang, but with a legal underpinning. That aside, does liability fall solely on the "company" for actions undertaken and mistakes made by the employees, management, officers, and owners of said company? If I'm going to sue Guntrader 1.0, LLC for some perceived infraction, why can't I also sue the directors personally in an attempt to make myself whole?
When I lived in Georgia (US) this was common practice for home builders. Build as many shoddy homes as they can, Sell them with arbitration contracts and a 3rd builder warranty and when the claims start piling up just dissolve the company, Let the warranty company pay out the claims and then open up under a new name. Rinse repeat.
They all would use the same warranty company over and over. I never understood why the warranty company would not investigate the owners of the "new" companies and refuse to warrant their homes. Maybe is a sum game, maybe a majority of the home buyers never file a claim and just accept the shoddy work and the expense to fix it.
I naïvely assumed that liquidation in such a case involved the original entity losing control of its assets.
It sounds like Guntrader just shouted "liquidation" at the court, then moved its assets from one pocket to another in the same pair of trousers.
I'd be really interested to see Guntrader v1 wound up and its assets sold off to meet obligations. Since I imagine its assets include web site, trade names, and customer data, how would those be valued? Who would be permitted to buy them and what guarantees would they have to make?
Good question.
From my point of view, it's the fault of the law. There is no justification to let a person under liquidation procedure open another company, whatever that company may be.
One thing at a time.
First you handle the liquidation issue, then you start over.
Here, it is apparently allowed to open multiple companies although one of your existing ones is being scrutinized.
I think it would be good to put a stop to that, by mandating that anyone owning a company that is in liquidation cannot open new companies until the procedure is over.
There can be completely legitimate reasons for owning more than one company at a time. This operation does not immediately seem to be one of those.
In Denmark I think (IANAL) that if it was found part of fraudulent behaviour would get you barred from serving as manager of a company.
That wouldn't be a very effective provision. Just form the new company, then start to liquidate the old one. There does need to be a provision in law to deem the new company as being the same entity as the old one. That would put a stop to a lot of the shenanigans. In fact, I wonder if there's any provision in existing law to prevent a judge coming to that conclusion.
If I read the article correctly, the owner started the new firm a month before declaring liquidation. So there would be nothing in your rules to stop him doing it. It does show significant intent though. And I hope he gets slammed for that.
But I won't hold my breath...
I have not looked but it was probably a pre-pack sale. This is a sale of the company assets done before anyone except the managers know what is going on. Liabilities are left - ie unsecured creditors get little/nothing - which can include employee pension payments, etc.
"it was probably a pre-pack sale. This is a sale of the company assets done before anyone except the managers know...."
As I understand it, a "pre-pack" bankruptcy is when the key people (e.g. owners, creditors) agree on a plan first, then present that plan as part of their court filing. If the judge finds that the plan is legally valid and is accepted by enough creditors, then it's done. Nice way to reduce legal fees, but as you say, a majority of creditors can use it to exclude low-priority claims from the conversation.
This may be a case of a parent company opening a second (third, fourth, etc) company while one is engaged in a bankruptcy proceeding. It certainly isn't against the law for me to invest in other entities while one is being liquidated.
The issue will probably turn out to me the transfer of contracts and customer records and the timing of such transfers relative to the bankruptcy filing.
"The issue will probably turn out to me the transfer of contracts and customer records and the timing of such transfers relative to the bankruptcy filing."
IIRC the liquidator can go back several YEARS before the date of filing, so creating and transferring a new company a month before isn't going to wash out unless there's a nod and a wink to a blind horse - which might well have been the case with a lot of such phoenixings but this one is getting extra special attention and now the liquidator is going to get some scrutinisation too
Technically selling assets for zero value - which is presumably what has been done here is an offence and the liquidators should reclaim the assets. This would include member lists, website, and potentially goodwill (though completely abstract)
Deliberately stealing assets is theft
Sadly I have seen too many times where liquidators fees magically happen to be the amount left in the companies bank account and they just say there is nothing left (they get the first slice of the pie)
Section 216 of the Insolvency Act 1986 dictates that directors of a company in the 12 months before its liquidation, cannot act as the director of a new company with the same or a similar name for five years.
There are a few exceptions, but I don't see these applying if you just start up again the next day with almost the same name and director. This case will probably end up being tested in court I would imagine. As regards the similar names :
"The ‘prohibited name’ restrictions include any name the liquidated company has been known by at any time in the 12 months immediately before the liquidation. This might be the official company name registered at Companies House, a trading name, or any name that’s similar enough to the registered or trading name to suggest an association with the liquidated company. The objective test for whether a name is too ‘similar’ is if a reasonable man on the street would believe the liquidated company and the new company are in any way connected based on their names alone."
I think the trick is to have multiple companies, all with very similar names, from the off. It also helps sow seeds of confusion as to which company a claimant needs to serve papers to. It works even better if you can split your business activity between them all so that each one has minimal assets.
I was just thinking there must be some clearance to open a firearm business
can this be done by anyone in the UK?
even with a company they left with this problems?
They’re not a Registered Firearms Dealer. They’re basically eBay (rather than Amazon) - they never legally touch the firearms. They just provide the marketplace to connect buyers and sellers.
It’s up to the transacting parties to check each other’s paperwork.
You are correct that if someone was actually a Registered Dealer and wound up an entity in such a fashion, the Police would take a dim view on whether they were still considered “fit and proper”.
Sounds like the Firearms Dealer legislation needs urgent updating to include marketplaces such as this. Anyone with names and addresses of firearms buyers and sellers should be subject to just as much of a licensing requirement as traditional gunshops.
Sounds like the Firearms Dealer legislation needs urgent updating to include marketplaces such as this. Anyone with names and addresses of firearms buyers and sellers should be subject to just as much of a licensing requirement as traditional gunshops.
Why?
Firearms Licensing is designed to regulate who is fit and proper to possess and trade in firearms. Why would you try and bolt in some sort of data protection regulation onto that?
Data Protection is regulated by GDPR.
Whilst the names and addresses of firearm buyers/sellers are indeed sensitive, they are by no means uniquely sensitive - no more so than health data, case worker notes relating to domestic abuse or substance addiction, HR employee/disciplinary files, etc.
Saying that any person running an online marketplace needs to be an RFD would be an insane exercise in box-ticking.
"Will you trade in firearms?"
No.
"Will you store any firearms on-prem?"
No.
"So you'll never take possession of any firearms?"
No.
"Is your data stored securely?
Oh yes. In accordance with GDPR.
"I have no idea how to assess that, so I'll leave that to the ICO."
There are also many, many old-school phpBulletin forums knocking around with a sales board. Again, none of those are going to bother getting RFD status so that users can post gear for sale.
I did note the personal liability portion of
without the director committing a criminal offence and in the case of the carrying on of the business through another company, being personally liable for that company’s debts
So is Alexander Charles Andover personally liable for the old company or new company under that statement ?
I'm guessing as it was a statement for the old company (so the name can be re-used in the new) the personal liability element is for the old company. Can anyone confirm ?
The Mozilla Observatory (https://observatory.mozilla.org) is a tool that is geared towards informing website owners of best practices for securing their sites.
The www.guntrader.uk main page gets a Failing grade. Their user registration page scores a "D minus".
Have they done anything to protect their customer's information going forward?
That's the point. One of the old tax avoidance tricks was for the directory to "borrow" funds from the company.
As it was a loan rather than salary, dividends or some other taxable payment then there was no tax. After a few years the company would be made insolvent and the debt would be written off. The directory would setup a new company and be trading under the new name.
It's only a few years ago that HMRC realizes that some people were doing aggressive tax avoidance in that way and started going after company directors who had closed companies where they owed the company significant sums.
This post has been deleted by its author
I have a little personal experience in this area hence AC.
From my perspective there are legitimate grounds for using the protection of a limited company and for becoming a phoenix (reopening under a different name).
My small business was registered as a ltd co. primarily because if I got sued personally for some kind of issue with a business that didn't make much profit at the best of times, I could lose my house, my savings etc. I closed down primarily to retire but I had a long-term employee who'd be entitled to a redundancy payment greater than the annual profit. By liquidating HMRC paid that, a drop in the ocean compared with the tax & NI they'd had from the business over the previous 25 years.
I ensured all my suppliers had been paid before I started the process, small businesses come last in getting any cash released by the liquidation (often bugger all left after the liquidator and then the tax man). I didn't want to be the start of a domino process where, because their bills were unpaid, other small businesses might have problems. The insolvency practitioner was an eye-opener, £300 an hour... He did fail to identify that some assets might have some value such as domain names or client list. I couldn't have sold the business as a going concern because the redundancy liability would have been greater that the value of those assets.
I then hit another issue, the former clients needed ongoing support, essentially they needed it from me. After a few months only 3% had found someone else to provide those services and people were still asking me for help. I created a new ltd company (same reason as before, a need to protect my personal assets) but operating on my own with no office and staff overheads and just providing that support, not taking on any significant new commitments. Six years on, still doing some work for about 80% of the clients of the old business. It's only a few hours work a week but I'd still like to fully retire. With no liabilities what's left is saleable if I can find someone with the budget and skill set.
Of course this in no way justifies what guntrader appears to have done but I recognise that liquidation is an escape from potential costly litigation. If the only losers are some chancers hoping for £££ compensation for the leak, my sympathy for them is limited. On the other hand fully behind any activity by ICO, NCA, Police, investigation of Insolvency Act violation, or into possible questionable reallocation of assets.
" I closed down primarily to retire but I had a long-term employee who'd be entitled to a redundancy payment greater than the annual profit." - and you failed to recognise this liability, and decided to foist it off onto us the taxpayer?
HMRC should throw the book at you.
@AC: So you liquidated your company to avoid your responsibility for paying your employee's redundancy. You got HMRC (ie. funded by taxpayers) to pay the employees compensation instead. "I recognise that liquidation is an escape from potential costly litigation", I'll correct that for you "I recognise that liquidation is an escape from my financial responsibilities".
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