Directors Disqualified for invoice finance fraud
There are somewhat conflicting reports as to the current level of deliberate fraud in the invoice finance industry, but it is worth keeping a watch on some of the cases relating to director qualifications.
In this regard it is noteworthy that three directors were recently banned for a total of 29 years for an invoice finance fraud.
NJ Transport Ltd was a family logistics company which in 2009 obtained an invoice factoring facility from RBS Invoice Finance. The company’s debtor book then rose significantly from 2014 onwards so that by June 2017, when the company was insolvent, it had a debtor book which appeared at around £620,000.
However, it eventually transpired that between 2016 and 2018 some £425,000 of false invoices had been produced and fed into the RBS invoice finance system. In the ensuing liquidation process, it emerged that the real debtor book amounted to a little over £100,000 and even that was unlikely to be recoverable. In the same period, loans to directors (evident in the audited accounts) had risen to an almost identical figure.
It would appear that the company had not been set up to commit an invoice fraud scheme but poor performance had led the directors to extract money which the company had simply not earned, and the submission of false invoices to RBS had been the means of balancing the books.
A claim was brought against one of the directors under her Personal Guarantee but she declared herself bankrupt and in the event RBS was left with an unpaid debt of around £500,000.