The Insolvency Service (IS) is to launch disqualification proceedings against one of Britain’s leading businessmen, Sir Clive Thompson, over his role in the failure of Christmas savings club Farepack, according to the Daily Mail newspaper.
More than 116,000 people lost a total of £40m when Farepack collapsed in 2006 – after lending around £35m to its parent company, European Home Retail (EHR), chaired by Sir Clive.
Although disqualification is unlikely, the accusation that Sir Clive and eight other EHR non-executive directors took ‘unreasonable risks’ would damage the reputation of the former president of Britain’s top business lobbying organisation, the Confederation of British Industry.
According to sources close to the case, Sir Clive and the other eight independent directors of EHR have disagreed over how to defend themselves against the allegations and consequently engaged separate lawyers.
Nevertheless, there is little chance any of them will face disqualification.
Investigators must establish the date and reason for the loan; whether creditors would have suffered so great a loss if Fairpack had kept the cash; and if EHR should repay the debt.
However, they can only go for disqualification proceedings if the money was paid to EHR in the 12 months prior to the appointment of administrators.
If it is found the EHR’s directors acted irresponsibly, prosecutors will have a case in law to go after the holding company and have the funds returned.
If administrators can prove the money justifiably belongs to Farepack and their creditors because the loan caused the company’s demise, they will be justified to take them to court.
More importantly, if they can prove the funds were customers’ deposits, the holding company had no right to take that money.
However, if they could prove these things, they would have by now.
At the time of the transaction, Sir Clive was not an appointed director of Farpack, but chairman of the holding company, which is still trading, so I can’t see how they can proceed with the disqualifications unless he can be held as a shadow or defacto director.