The former finance chief of Carillion is to be banned from holding company directorships for more than a decade.
Sky News can reveal that Zafar Khan, who served as Carillion’s finance director for less than a year prior to its implosion in early 2018, has been hit with an 11-year boardroom ban.
City sources said the penalty – handed down by the government’s Insolvency Service – was likely to be disclosed early this week.
It will be the first such ban imposed under the Company Director Disqualification Act against any former Carillion executive.
Proceedings against a number of others, including former chief executive Richard Howson, remain ongoing.
In a letter to MPs sent weeks after Carillion’s collapse, Mr Khan said he had been at odds with the company’s board about disclosures relating to its financial health.
“Whilst I fully accept responsibility for my actions as a director of Carillion plc, I do genuinely believe that it was the level of debt which had been allowed to grow in previous years which was the principal contributing factor to the difficulties Carillion experienced in 2017 as trading conditions worsened,” Mr Khan wrote.
He added that his contract was terminated by the company four months before it ceased trading.
In total, eight former Carillion directors face bans following the launch of legal proceedings authorised by Kwasi Kwarteng, the then business secretary, in January 2021.
Last year, Mr Khan, Mr Howson and Richard Adam, who also served as Carillion’s finance chief, were fined a total of close to £1m for issuing misleading statements to investors about the state of the company’s finances.
The trio were reported to be appealing against the fines imposed by the Financial Conduct Authority.
Carillion’s demise was one of the most notorious failures of a major British company in the last decade.
The construction group, which was involved in building and maintaining hospitals and roads, and delivering millions of school meals, went bust owing close to £7bn.
Thousands of jobs were lost as a result.
Its collapse also became one of the principal catalysts for reform of the audit sector in Britain, with consequences including the creation of a new watchdog, and a requirement for the big four accountancy firms to ‘operationally separate’ their audit and consulting arms.
At the time of its collapse, Carillion held approximately 450 construction and service contracts across government.
It employed more than 43,000 people, including 18,000 in the UK.
In a scathing report on the company’s corporate governance, the Commons business select committee said: “As a large company and competitive bidder, Carillion was well-placed to win contracts.
“Its failings in subsequently managing them to generate profit was masked for a long time by a continuing stream of new work and… accounting practices that precluded an accurate assessment of the state of contracts.”
KPMG served as Carillion’s auditor for almost two decades, earning a total of £29m for its audit work.
A major probe led by the Financial Reporting Council into KPMG’s work on the company’s accounts is yet to be completed.
Greg Clark, the then business secretary, wrote to the Insolvency Service soon after Carillion’s liquidation to seek an accelerated probe into the conduct of its former directors.
“I would ask that the investigation by the Official Receiver looks, not only at the conduct of the directors at the point of its insolvency, but also of any individuals who were previously directors and whether their actions may have caused detriment to its creditors – including detriment to any employees who may be owed money,” Mr Clark wrote at the time.
“He should also consider whether any action by directors has caused detriment to the pension schemes.
“I also ask that the Official Receiver expedites his investigation which will also specifically consider the extent to which the conduct of the directors of Carillion PLC led to its insolvency.”
The Insolvency Service has been contacted for comment, while Mr Khan could not be reached for comment on Monday morning.
For all the latest business News Click Here
