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High Court Ruling Forces Fraudulent Construction Companies into Liquidation

Written by: Keith Tully

Published: 8th February 2016

A ruling delivered at the High Court in London has seen an apparently interconnected group of construction and civil engineering companies forced into liquidation.

Judges agreed with the findings of an extensive Insolvency Service investigation that found a total of 15 companies had been created purely as “instruments of fraud” designed to enable access to credit on a considerable scale.

“These supposedly unrelated companies had no legitimate purpose and existed solely to seek to obtain easily disposable goods on credit including expensive motor vehicles on lease finance with no intention of paying for them,” said Chris Mayhew, a company investigations supervisor at the Insolvency Service.

“False accounts were filed by some of the companies to create the impression that they were substantial and credit worthy businesses and had been trading profitably for a number of years which the investigation found to be blatantly untrue.”

Winding up petitions were brought by the UK government against the 15 companies, which had claimed to be delivering combined sales worth £50 million and to have control of assets worth £8.4 million.

The companies had a number of registered offices in different parts of Britain but none were home to any physical presence relating to construction or civil engineering activity, the Insolvency Service found.

The decision to wind up the companies was welcomed by the Insolvency Service, which has said that fraudulent activities such as those its recent investigation uncovered can cause legitimate businesses to lose out on hundreds of thousands and potentially even millions of pounds.

In the case of the 15 fraudulent construction companies now being liquidated it was found that false financial results had been filed on their behalf in relation to a period of two years during which they had effectively been dormant and under the control of company formation agents.

To give the false reports an apparent legitimacy, fictitious directors were appointed to the various companies with the dates at which they were supposedly appointed falsely backdated.

“I would urge businesses approached for credit to question why a potential new corporate customer would choose to back date the appointment of its recorded officers and to file accounts showing significant trading and assets at a time when clearly the company was still on the shelf of the company formation agent dormant awaiting sale,” said Mr Mayhew from the Insolvency Service in a statement.

Keith Tully

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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