Liquidated company sinks further after director defrauds credit lender

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A company which was struggling to pay its debts and was placed into liquidation has fallen into further disrepute after an investigation uncovered that it had attempted to defraud lenders.

The transport company, based in Birmingham, was acquired by another company in 2011 and entered into a Company Voluntary Arrangement (CVA) to help manage its finances.

The company saw some success in subsequent years, returning to profit between 2012 and 2014, but fell behind on payments in the years after.

Consequentially, creditors applied to have the business wound up in March 2017, with insolvency practitioners taking control of the company’s finances in April 2017.

An investigation revealed that the business had entered into an Invoice Discounting Agreement (IDA) with an external lender, meaning the company could get credit up front rather than wait for payment from customers.

But an audit revealed that the transport company had not been honest about what they were owed by customers.

The Insolvency Service, conducting the investigation, found that the director caused the company to claim funds for work that were higher in value than the work completed.

It said this resulted in the company securing increased levels of funding and cash flow to the value of just over £1 million.

For his part in the deceit, the director was banned from acting as a company director for a period of nine years, during which time he cannot directly or indirectly become involved in the promotion, formation or management of a company.

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.”

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