Eight former Carillion directors could be banned from holding board positions for up to 15 years under last-ditch legal action being brought by ministers almost three years after the government contractor collapsed.
Kwasi Kwarteng, the new business secretary, launched the proceedings just 72 hours before a deadline to bring civil action against the former Carillion executives and following a report by the government’s official receiver.
Ministers had decided to seek the order to disqualify the directors on the grounds that they were “unfit to manage a company” and it was in the public interest, according to the government’s Insolvency Service, which handled the liquidation process.
Carillion went into liquidation in January 2018, leaving the government scrambling to ensure delivery of school meals, hospital services and prison cleaning and threatening thousands of jobs.
The company, which had £7bn of liabilities and just £29m of cash when it collapsed, was accused of continuing to pay dividends even as its financial health deteriorated and its pension deficit grew to £587m.
A joint report by two parliamentary select committees found Carillion’s business model had been characterised by a “relentless dash for cash, driven by acquisitions, rising debt, expansion into new markets and exploitation of suppliers”.
They also said that “it presented accounts that misrepresented the reality of the business and increased its dividends come what may”.
Two chief executives — Richard Howson, who was in the role from 2011 to 2017, and Keith Cochrane, a company director from 2015 who took over from Mr Howson, are listed in the action, alongside Philip Green, its chairman from May 2014 until its demise. Mr Green was also a former adviser to former prime minister David Cameron on corporate responsibility.
Finance directors Richard Adam, in the role between 2007 and 2016, and Zafar Khan, who held the position for nine months in 2017, are also listed together with non-executives Andrew Dougal, Alison Horner and Ceri Powell.
Noble Francis, economics director of the Construction Products Association, said it was “disappointing that it had taken so long for directors to be held to account”, adding that it was “essential that all those responsible for the liquidation of Carillion are brought to justice, whether they are senior management or auditors”.
The executives could be banned for between two and 15 years from being the director of a company or from forming or promoting a company in the UK or with connections to the UK.
Last year the Financial Conduct Authority said that it had issued warning notices against “certain executive directors” and was proposing a public censure against the company.
Other government contractors have since run into trouble including Interserve, which was taken over by creditors in 2019 and is in the process of being wound down, and G4S, which is being taken over.
The Insolvency Service said: “We can confirm that on 12 January 2021 the secretary of state issued company director disqualification proceedings in the public interest against eight directors and former directors of Carillion.”