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Fast-track inquiry into Carillion directors following liquidation

23 January 2018

The UK Government has requested an immediate inquiry into the directors of Carillion.

In the coming months, the liquidator will discover if there was any directorial misconduct. It will also reveal the reasons behind the company’s collapse.

Why is the government fast-tracking the investigation into the directors?

As part of the liquidation process, the Insolvency Service carries out an investigation into the conduct of directors as a matter of course. It looks for evidence of wrongful or fraudulent trading, as well as proof that directors have acted in a proper and timely manner in line with the creditors' best interests.

Usually, this takes place at the end of the liquidation process and can take up to a year to complete. However, in this case, the UK Government has ordered an immediate inquiry into the directors’ affairs.  Although in reality, the most important thing is to ensure that monies are collected in, people kept informed and assets sold and/or contracts transferred in a timely manner.  Any investigation will take time.

The Business Secretary, Greg Clark, has written to both the Insolvency Service and the Official Receiver to request that they fast-track the investigation and extend its scope. He has also sent a request to the chairman of the Financial Reporting Council (FRC) to investigate the preparation of Carillion’s accounts and the company’s auditor, KPMG.

He is most likely pursuing this rigorous and urgent approach due to the company’s standing as a market leader, and its involvement in the High Speed 2 (HS2) railway project.

Mr Clark commented:

“It is important we quickly get the full picture of the events which caused Carillion to enter liquidation, which is why I have asked the Insolvency Service to fast-track and broaden the scope of the Official Receiver’s investigation.

“In particular, I have asked that the investigation looks not only at the conduct of the directors at the point of its insolvency but also of any individuals who were previously directors. Any evidence of misconduct will be taken very seriously.”

What will happen to the directors?

If the Insolvency Service discovers any misconduct on the part of the directors, the consequences could be severe. It’s possible the directors will be:

  • Held personally liable for the company’s debts
  • Disqualified for up to 15 years
  • Fined for their actions
  • Sent to prison (this is much more likely in the case of fraudulent trading)

However proving misconduct when a business runs out of cash is difficult.  Last year a similar investigation cleared the directors of any wrongdoing in the collapse of City Link

If you are concerned about liquidation procedures or how Carillion’s liquidation might affect you, ask our experts for tailored advice today.

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