Two company directors have been disqualified after their firm breached the terms of an invoice discounting agreement (IDA).
The company had entered into the IDA with the bank after falling into financial difficulty.
The directors, one whom was the managing director, breached the IDA by re-aging some of the invoices to give the impression that they fell within the lending criteria of the agreement. This caused the bank to terminate the IDA.
The company was unable to recover from its financial difficulties and went into administration. The directors blamed the company’s finance manager for breaching the IDA, even though they were the ones who signed the company accounts.
The court heard that there had been no board meetings or investigations to make sure the terms of the IDA were being met. The directors had not taken responsibility for their company.
The court ruled that the managing director’s conduct was below the appropriate standards and he was disqualified for six years.
The court also ruled that the second director bore some responsibility. He was aware that the bank was concerned but didn’t take steps to find out what was happening. He was disqualified for three years.
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