Hakan Cemal and Sureyya Bektas  were directors of Hey Trends Ltd. The company was part of a group under the ‘Hey’ trading style based in Turkey which traded between 2003 and November 2011 in design, manufacture and export of clothing.

Cemal was director throughout and his father-in-law Bektas was a director throughout, except between July 2005 to May 2006.

The London-based operation went into liquidation in April 2013 with liabilities of £126,178 and owing HMRC £74,903.

A subsequent investigation by the Insolvency Service found that in November 2011 Hey Trends and an associated Turkish company sold their respective businesses to a third party. Hey Trends immediately ceased operating.

The terms of the sale agreement provided that the net sale proceeds of €10.5m were to be split 70/30 between the Turkish company (€7.4m) and Hey Trends (€3.1m, which equated to £2.7m).

Hey Trends did not receive its share of the net sale proceeds, which were held in the Turkish company of which Cemal and his wife held all the shares.

The Insolvency Service said Cemal claimed it was a loan, although no security was sought or given, and maintained there was no mechanism for recovery of these moneys other than Cemal deciding to repay.

In November 2012, almost exactly a year after Hey Trends had stopped trading and during which time virtually no transacting had occurred within the company’s bank account, £79,521 was paid into Hey Trend’s bank account in error by a third party who had no connection or trade whatsoever with it. Between 20 and 26 November 2012 those moneys were removed on instructions from Cemal.

The liquidator of Hey Trends received claims from creditors totalling £1,990,011, and the Insolvency Service says the money extracted by Cemal would have enabled all known creditors to have been repaid.

Additionally, the accounting records delivered up were so incomplete that the recipients and reasons for expenditure totalling £655,553 could not be verified. Furthermore, it was not possible to find out whether £189,081 received was for bona fide business purposes, nor was it possible to establish the true position of the company’s assets and liabilities.

The current position as notified by Hey Trends’ liquidator is assets of £114,452 and liabilities of £1,990,011.

Cheryl Lambert, chief investigator at the Insolvency Service, said: ‘In this case the directors have diverted millions of pounds from a UK business to Turkey, through a sham transaction, leaving a trail of creditors. Taken with the opportunistic diversion of money knowingly received in error, this is tantamount to fraudulent activity.

‘The bans handed out by the court show that such abuse of the privileges of limited liability trading is regarded as at the most serious end of mischief and misconduct. Most particularly, directors need to be aware that inactivity does not absolve them of their responsibilities.’

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