Contractors, don’t treat your PSC like a piggy bank, as Rob Cross did

A ban of 5 years after failing to pay £450,000 makes him the 3rd celebrity personal service company director of late to fall foul of the law. These are numbers, and more importantly his numbers, that former world darts champion Rob Cross won’t be proud of, writes Gareth Wilcox, partner at Opus Restructuring.

What structure did Rob Cross use?

Like many other media figures, Rob Cross chose to operate through a Personal Service Company (PSC), Rob Cross Darts Limited (RCD).

There’s nothing wrong so far. Using a PSC (typically a limited company) is a common practice for sports professionals and other media personalities, as it provides tax-efficiency and flexibility -- just as it does in the wider contractor market.

What obligations do limited company directors have?

Mr Cross was the sole director of his PSC and with this office, comes the responsibility of running the company as a separate legal entity.

In fact, one of the key obligations of a limited company director is to make sure that the liabilities of the company you are appointed over can pay its liabilities. 

Unfortunately, as has been seen time and again, this is where the failure by Mr Cross appears to have begun.

What went wrong for Rob Cross Darts Ltd?

On 16 November 2023, RCD was placed into insolvent liquidation. 

The only assets listed on the statement of affairs at liquidation were:

• a director’s loan of £423,608 and;
• a Section 455 tax refund of £138,716 (which would be recoverable on the repayment of the loan). 

Both assets were listed with an ‘uncertain’ realisable value, so clearly at that point, it was not clear whether Mr Cross would be able to repay his loan.

What did the Insolvency Service investigation into Cross’s conduct find?

Following the liquidation of RCD, the Insolvency Service opened an investigation into Mr Cross’ conduct, and found that it was delinquent in that:

• RCD had failed to pay more than £450,000 in tax to HMRC;
• Between March 2020 and November 2023, Mr Cross removed more than £300,000 which should have been paid to creditors;
• The aforementioned director’s loan had been drawn and not repaid.

Rob Cross’s pre-liquidation numbers…

A total of £1million of Mr Cross’ income had been paid into RCD between March 2020 up to liquidation, as well as £169,500 in sponsorships and £261,901 from his management company.

In addition to the points above, £665,419 was paid to connected parties.

Again, these are numbers that the 2018 world darts champion will now be all too familiar with.

For contractors who are running their own company, though, it is worth noting that Mr Cross is now the subject of an Individual Voluntary Arrangement (IVA).

What is an IVA?

An Individual Voluntary Arrangement is a personal insolvency procedure. An IVA is also legally binding.

In Mr Cross’s case, the IVA means he will have reached an agreement with his creditors (RCD included) to repay the debts that he owes, over a certain period.

What is Cross’s punishment?

As with two of the media personalities featured in my previous article on company director bans, Mr Cross agreed to a “disqualification undertaking,” preventing him from being involved in the promotion, formation or management of a company, without the permission of the court. 

What is a disqualification undertaking?

A disqualification undertaking is where the disqualified director agrees to a shorter duration of ban, in consideration of saving the costs of forcing the Secretary of State to seek an order that they be disqualified for a longer period. 

What points can directors take from the case of the (corporately) disqualified darts legend?

The Cross case serves as yet another reminder that a PSC cannot be treated as the personal bank account of its director. In short, your ‘limited’ is not your piggy bank.

A limited company is a separate legal entity from the director(s), with its own assets and liabilities, even if it bears their name(s). 

Whether they realise it or not, persons serving as directors take on a range of fiduciary duties, including a duty to ensure that sufficient cash reserves are maintained in order to pay liabilities as and when they fall due.

Practical tips for PSC directors to take to tick off ending up like Cross

Put simply, PSC directors ought to maintain a regular review of their balance sheet, and ask for advice from their accountants as to amounts which are available to be drawn as dividends, or otherwise as income. 

Crucially, remember that a certain percentage of a company’s income will always be payable as tax. And so it pays to stay on top of these figures to avoid costly mistakes which can be -- and in the case of Mr Cross have been – far-reaching beyond the bounds of the PSC.