Carillion’s former chief financial officer was banned from the British board for 11 years

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Carillion’s former chief financial officer has been barred from holding the company’s directorship for more than a decade, marking the first boardroom ban for an executive at a construction company that collapsed.

Zafar Khan, who served as Carillion’s chief financial officer before its collapse in early 2018, has been disqualified from working as a director for a British company for 11 years by the government’s Bankruptcy Service. Khan had provided “false and misleading financial information” in 2016 including reporting a pre-tax profit of £146.7 million, the government agency said on Monday. By contrast Carillion should have reported an adjusted year-end loss of at least £61.7 million.

The ban comes more than five years after construction and outsourcing companies collapsed with just £29 million in cash and £7 billion in liabilities in January 2018, leaving the UK government to step in to ensure the delivery of key services such as school, hospital and prison meals. . cleaning.

Legal proceedings against several other former Carillion directors, including former chief executive Richard Howson, are ongoing. The trial will start in October.

Khan said: “I took over as Carillion’s finance director in January 2017 and I stepped down just eight months later. Six years after I resigned, and five years after the bankruptcy of Carillion, the regulatory process against me and other directors continues and I have decided, in the interest of my family and ultimately drawing the line under this process, that I will provide an undertaking of inaction [as] a director.

“I want to emphasize,” he added, “that, when I took on the role, I recognized that the group faced significant commercial challenges and I devoted all of my energy to addressing these challenges. I believe I act at all times in the best interest of the company. I regret not being able to make a sizeable difference in my short time in office.”

Khan was also found to have caused the company to make market announcements in March and May 2017, which were misleading about the reality of Carillion’s financial performance, the Bankruptcy Service said. This was found to be a violation of London listing rules and EU market abuse regulations.

He was also responsible for paying £54.4 million in dividends in June 2017, which was unjustifiable because the company’s 2016 financial statements did not represent a “true and fair view” of the company’s financial position, the agency added.

Ben Drew, partner at law firm Fladgate, said: “The length of the ban is at the top level of the director’s disqualification period, reserved only for the most serious breach of director’s duties.”

But Noble Francis, director of economics at the Construction Products Association, said it was “appalling that it would take five years for anyone to face punishment for something as serious as this”.

In 2022 the UK Financial Conduct Authority fined Khan and Richard Adam, another former finance director of Carillion, £154,400 and £318,000 respectively for issuing announcements in 2016 and 2017 that “made misleadingly positive statements about Carillion’s financial performance”.

The Financial Reporting Council, the UK’s auditing and accounting regulator, has also been investigating Khan and Adams since 2018 in a separate investigation. Regulators do not have the power to investigate company directors unless they are qualified accountants, a loophole it hopes to address in the long-awaited audit and corporate governance reforms developed in part in response to the Carillion collapse.

KPMG’s Carillion auditors are also being investigated by the FRC. This year, they settled a separate £1.3 billion civil lawsuit filed by liquidators Carillion for an undisclosed amount.