Director disqualified for 8 years for abusing a credit facility
David Marsh, the Finance Director of Euromix Concrete Limited, has been disqualified for 8 years for abuse of an Invoice Discounting Facility at the risk and detriment of the funders and ultimately, the general body of creditors.
The disqualification, from 20 November 2015, prevents Mr Marsh from directly or indirectly becoming involved in the promotion, formation or management of a company for the duration of the term.
The funders of the Invoice Discounting Agreement became aware of discrepancies during an audit in March 2013. It then became apparent that Mr Marsh had claimed funds for non-existent invoices and claimed to have made payments to the Invoice discounters when no cheques were actually banked or were banked at a later date. This was hidden by a series of intercompany fund movements and the use of concealed bank accounts. As a result, Euromix obtained increased factoring funding and cash flow and built up a deficiency to the factors of approximately £500,000
Following the discovery Mr Marsh was removed from Euromix and an interim finance director was appointed who continued trade up to the date of Administration to mitigate the funder’s losses and provide the best return for creditors.
Both the factor and bank were protected by fixed and floating charges on all the assets of the company and thus were paid in full in respect of their liabilities. This caused any deficiency on the factoring account or overdraft on the bank account to be passed to the general body of creditors, in that the overall amount available for distribution after charges had been satisfied was reduced by the deficiency in the factoring account caused by his actions.
Rob Clarke ,Group Leader of Insolvent Investigations North , part of the Insolvency Service, said:
This disqualification should demonstrate to company directors that the Insolvency Service will investigate all forms of misconduct, no matter how complicated the evidence and that we will act to disqualify. This was a complicated and well concealed fraud where the Insolvency Service worked closely with the Insolvency Practitioner to identify and evidence exactly what had happened and the scale of the fraud .
In this case, Mr Marsh was aware that his actions were breaching the invoice discounting agreement and that his actions were to the risk of the funders and ultimately the general body of creditors.
Notes to editors
Mr Marsh’s date of birth is 3 December 1960 and he resides in Ipswich.
Euromix Concrete Limited (CRO No. 01720534) was incorporated on 5 May 1983 and traded principally from Unit 1, Boreham Industrial Estate, Waltham Road, Boreham, Chelmsford, Essex CM3 3AW and also 5 other locations, and supplied high quality ready mixed concrete to the construction industry.
Mr Marsh was a director from 1 November 2012 to 23 May 2013. The Company went into Administration on 20 December 2013 with an estimated deficiency of £7,129,883.
On 30 October 2015, the Secretary of State accepted a Disqualification Undertaking from David Marsh, effective from 20 November 2015, for a period of 8 years. The matters of unfitness, which Mr Marsh did not dispute in the Disqualification Undertaking, were that:
I caused Euromix Concrete Limited (Euromix) to misuse its Invoice Discounting Agreement (the Agreement) with its funders dated 24 May 2007 during at least February and March 2013, in that invoices were input onto the invoice discounting facility which were not in respect of genuine sales as required by the terms of the facility, or were sales to connected parties which were prohibited under the facility, and therefore at the risk and detriment of the funders, and ultimately to the risk and detriment of the general body of creditors.
I caused or allowed Euromix to submit a P35 return to HM Revenue and Customs for the tax year 2012/2013 upon which PAYE deductions and NI contributions were under-declared in that they did not include all the individuals who were employed and paid by Euromix during that year. Individuals who did not appear on the P35 return but who were included within the records of Euromix as employees were paid at least £180,038 from Euromix’s bank account between 06 April 2012 and 05 April 2013.
A disqualification order has the effect that without specific permission of a court, a person with a disqualification cannot:
- act as a director of a company
- take part, directly or indirectly, in the promotion, formation or management of a company or limited liability partnership
- be a receiver of a company’s property
In addition that person cannot act as an insolvency practitioner and there are many other restrictions are placed on disqualified directors by other regulations.
Disqualification undertakings are the administrative equivalent of a disqualification order but do not involve court proceedings. Further information on director disqualifications and restrictions is available.
The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. It may also use powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK. In addition, the agency authorises and regulates the insolvency profession, deals with disqualification of directors in corporate failures, assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees, provides banking and investment services for bankruptcy and liquidation estate funds and advises ministers and other government departments on insolvency law and practice.
Further information about the work of the Insolvency Service, and how to complain about financial misconduct, is available.
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Published: 19 November 2015
From: The Insolvency Service