Nine-year director ban for £1m false claims
A director from Birmingham has been banned from running companies for nine years after falsely claiming £1m worth of work to secure advance payments from lenders
20 Aug 2018
Neil Hughes was a director of Contact Transport Ltd, which was incorporated in February 1980 and provided haulage and parcel delivery services.
In 2011, Contact Transport was acquired by another company, Keelek 369 Ltd, before it entered into a company voluntary arrangement (CVA) in the same year to help manage its debts, which was completed in July 2015.
While the company returned to profit between 2012 and 2014, Contact Transport entered into a difficult trading period and fell behind in repaying its debts to their creditors.
As a result, a winding up petition was filed against Contact Transport in March 2017 before the company became insolvent, with administrators appointed in April 2017.
Insolvency Service investigations found that Contact Transport had entered into an invoice discounting agreement (IDA) with an external lender, allowing the company to get advances on cash owed from customers rather than waiting for them to pay.
But during an audit in April 2017 the lender became aware of discrepancies between what Contact Transport had claimed and what the company was actually owed from its clients.
Investigators found that Hughes had caused Contact Transport to claim funds for work that were higher in value than the work completed. This resulted in the company securing increased levels of funding and cash flow to the value of just over £1m.
Martin Gitner, deputy head of insolvent investigations for the Insolvency Service, said: ‘Securing advanced payments is a legitimate method of sourcing working capital finance. However, Neil Hughes submitted false documents to wrongfully and deceptively claim more money than was actually owed to Contact Transport.
‘Nine years is a significant ban and this should serve as a warning to other directors that the Insolvency Service has strong enforcement powers to remove dishonest or reckless directors from operating a business for a considerable amount of time.’
Report by Pat Sweet