Turning black into white
I was not favourably impressed to read in Accountancy Age (‘Chronicle of a death foretold’, 1 April) the self-serving justification, by Scott Barnes of Grant Thornton, of the custom of appointing investigating accountants to receiverships. For people losing their careers, this is no ‘storm in a teacup’.
I was an injured creditor in one receivership, incidentally a Grant Thornton receivership, where I estimate the receiver was paid #300,000 for 22 days’ work by two clerks, and 3 days’ work by an accountant: proving it is more rewarding to destroy value than create it.
The sad fact of life is that not all accountants are people of integrity.
Many people could be tempted by this sort of profit to report white as black, or any other fiction which would win the business. If Scott Barnes is right, and his company is white as the driven snow, it should have nothing to fear from ‘MPs jumping on a bandwagon’ to protect company directors against misleading or self-interested reports by rogue investigating accountants.
Meanwhile, if even some accountants may be tempted, the sooner the protection sought, or preferably the stronger protection of something akin to Chapter 11, is in place, the better.
Peter J Chadwick, Oldham
That personal service touch Richard Murphy, (‘Letters’, 8 April) refers to the changes announced in the Budget designed to crack down on the tax advantages derived by contractors using personal services companies.
In my ten-year experience of personal services companies, where a contractor supplies services to a public-sector department, the department concerned usually insists on them being provided by a personal services company. Am I cynical in assuming that this is to avoid the payments concerned being queried during any subsequent PAYE investigation of the department concerned?
Perhaps the Treasury should send a note to the other government departments, explaining the purpose and scope of the new rules. Richard Crawford, Chantrey Vellacott DFK, Loneond WC1
Who’s watching the capital? I am concerned that banks and other sources of venture capital perform inadequate searches before lending money to buy businesses.
An individual who had been disqualified from his profession obtained capital and purchased companies in a specialised trade in which he not only had no qualifications but no practical experience either. He relied on the staff who came with the businesses, but none of them were appointed directors.
He would obviously be handicapped in controlling the businesses, and also in the development of either new manufacturing processes or new products.
When the businesses began to fail he continued to pay his salary and his wife’s as well as their pension contributions, financed by non-payment of VAT and PAYE. The companies were failing sequentially until the authorities woke up and wound up the last few.
Before he was disqualified from acting as a company director he found a business for sale in an associated trade, two other optimists and persuaded a bank to put up 90% of the purchase price. In less than two years this business had failed as well.
The application for finance these three submitted must have been ‘economical with the truth’. However, surely the lender should ask pertinent questions and do its own research. In this case, it should have requested from each: the names of all the companies of which they had been shareholders and/or directors in the last five years; names of all partnerships and sole trader businesses in which they had participated; copies of accounts of the companies and/or businesses for the last five years, and reasons for winding up businesses or selling of interest. The bank should also have completed Companies House searches.
How often are banks and other venture capital providers impressed by the forecasts and past record of the business being purchased without checking the credentials of the applicants?
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