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The former finance chief of Carillion has been barred from holding company directorships for more than a decade, marking the first boardroom ban on an executive of the collapsed construction company.
Zafar Khan, who served as Carillion’s finance director before its implosion in early 2018, has been disqualified from working as a director of a British company for 11 years by the government’s Insolvency Service. Khan had provided “false and misleading financial information” in 2016 including reporting a pre-tax profit of £146.7mn, said the government agency on Monday. Instead Carillion should have reported an adjusted year-end loss of at least £61.7mn.
The ban comes more than five years after the construction and outsourcing company collapsed with just £29mn in cash and £7bn in liabilities in January 2018, leaving the UK government to step in to ensure delivery of key services such as school meals, hospital and prison cleaning.
Proceedings against a number of other former Carillion directors, including former chief executive Richard Howson, remain ongoing. A trial is due to start in October.
Khan did not immediately respond to a request for comment.
Khan was also found to have caused the company to make market announcements in March and May of 2017, which were misleading as to the reality of Carillion’s financial performance, said the Insolvency Service. This was found to be a breach of London listing rules and the EU market abuse regulation.
He was also responsible for paying £54.4mn in dividends in June 2017, which could not be justified because the company’s financial statement in 2016 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 in the top tier of director disqualification periods, reserved for only the most severe breaches of a director’s duties.”
However Noble Francis, economics director at the Construction Products Association, said it was “appalling that it had taken five years for anyone to face punishment for something as serious as this”.
In 2022 the UK’s Financial Conduct Authority fined Khan and Richard Adam, another former Carillion finance director, £154,400 and £318,000 respectively for publishing announcements in 2016 and 2017 that “made misleadingly positive statements about Carillion’s financial performance”.
The Financial Reporting Council, the UK’s audit and accounting regulator, has also been investigating Khan and Adam since 2018 in a separate probe. The regulator does not have the power to investigate company directors unless they are qualified accountants, a loophole that is expected to be addressed in long-awaited audit and corporate governance reforms developed partly in response to Carillion’s collapse.
Carillion’s auditor KPMG is also under investigation by the FRC. This year, it settled a separate £1.3bn civil lawsuit brought against it by Carillion’s liquidators for an undisclosed sum.