GLA right to deny licence to ‘phoenix’ company

A decision to revoke the licence of a Wolverhampton based business, after it was discovered its newly-appointed director’s previous company had folded only weeks before owing more than £100,000 in tax, has been upheld by the appeals court.

Mahal UK Ltd of Buckingham Road, Penn, Wolverhampton, lost its licence with the Gangmasters Licensing Authority when Guljinder Singh, applied to take over control of the business from his brother, Harpreet.

Enquiries were made by the GLA after the application to take over as the named Principal Authority on its licence was submitted by Guljinder in March 2012. They revealed that he had been appointed a director at Mahal UK within five weeks of his previous company, Goldline Express Ltd, going bust. Goldline had gone into liquidation at the end of January and owed £111,000 in unpaid tax to HMRC.

Guljinder Singh’s previous involvement with a company that had gone into liquidation failed one of the GLA’s critical standards causing the licence to be revoked without immediate effect.

Mahal UK appealed against the revocation but it was dismissed this week by Birmingham-based employment judge Katherine Tucker.

GLA chief executive Paul Broadbent welcomed the decision saying what had happened with Mahal UK had many of the hallmarks of a case of ‘phoenixing’ – a company emerging from the collapse of another that has gone bankrupt.

“Mahal UK had held a licence since October 2009 but the company had never actually traded,” Mr Broadbent explained.

“What that meant was that when Goldline went under owing a six figure sum in tax, there was an alternative already in place, with a licence , ready to continue trading and debt-free.

“The GLA exists to ensure businesses are faced with a level playing field and part of that is ensuring that all licensed companies pay the correct amount of tax in a timely manner.

“Allowing operators to fold one month with huge tax debts only to start up again the next with a clean slate is something we will continue to look out for and clamp down on in future.”

Notes to editors

1. The GLA operates throughout the UK and is a Non Departmental Public Body.

2. Its aims are to prevent exploitation, protect vulnerable people and tackle unlicensed and criminal activity.

3. Around 1,200 labour providers are now licensed by the GLA.

www.gla.defra.gov.uk

For further information contact GLA Communications and Information Officer Paul Fearn on 0115 959 7069 or email communications@gla.gsi.gov.uk.