Director’s share sales drove taxi company to the brink, report reveals

Share sales by a director of one of York’s biggest private hire companies led to the business being placed in administration, a report has revealed.
 
Six Five Nine Cars went into administration in November before being sold in a deal which safeguarded all jobs at the business in January.
 
A report by administrators Begbies Traynor filed at Companies House detailing events leading up to their appointment, said that a director’s share sale deprived the company of trading income.
 
Six Five Nine Cars was founded in 2005 by Adrian Smith and Hilary Charles Taylor – Taylor later resigned as a director in 2012 and his shareholding was acquired by Smith.

In 2009, Smith sought to raise cash for the business by issuing ordinary B shares to the company’s drivers and external investors. Each share was sold for £12,000 and used for working capital.
 
Following the initial fundraising exercise, Smith subsequently created further ordinary C shares which were issued for £11,000. Thereafter, he sold, at least, 20 of his own A shares for £20,000 each, the report said.
 
In purchasing the shares, the driver shareholders were then entitled to reduced weekly subscriptions to the company.
 
The report said: “As a consequence of the director’s actions in selling his own shares, he effectively deprived the company of its trading income.” This led to “dramatically” reduced cash flow and difficulties with settling trading liabilities.
 
In the run-up to the administrator’s appointment, trading liabilities – especially a debt to HMRC in the region of £30,000 – were only able to be paid with the introduction of external cash, the report stated.
 
The company was placed into administration in November, which saw Smith being made redundant on economic grounds, while Rob Sadler and Dave Broadbent of Begbies Traynor traded and marketed the business before a sale was agreed to newly formed company 659 Private Hire last month, for £240,000.