Grant Thornton faces investigation by the English ICA over a case which has fuelled parliamentary demands for a change in the law to prevent ‘trigger-happy’ accountants forcing companies into receivership.
An investigations committee will decide next month whether there are grounds for disciplinary action over its involvement with Heritage plc, a housewares distributor.
The company collapsed in 1996 following an investigation by Grant Thornton into its financial affairs on behalf of Lloyds bank, a major creditor.
Following the investigation, Lloyds turned down a financial rescue plan put together by the company’s management and appointed Grant Thornton as receivers.
A series of complaints – firmly denied by Grant Thornton – have been lodged with the English ICA alleging failures and conflicts of interest arising from the firm’s roles as Heritage’s tax adviser, investigator and receiver.
But the case has already led to demands in parliament for the law to be changed. Tory MP Richard Page last week called for the Insolvency Act to be amended to ban firms who have acted as investigating accountants from acting as receivers to the same company.
The prospect of earning large fees from receiverships, he argued, made accountants ‘trigger-happy’ when they investigated troubled firms.
Page’s efforts are being supported by Baroness Dean in the House of Lords.
She said: ‘Some accountants do not even charge for an initial investigation into a company in the belief they will become its receiver – a judgment they reach before even considering the facts and figures.’
The government looks likely to oppose the proposal on the grounds it will drive up costs and reduce banks’ willingness to lend.
Scott Barnes, Grant Thornton’s head of corporate recovery, said the complaints had been made by Heritage chairman Jeffrey Lampert, who had already taken Lloyds to court and lost. He said there was no case to answer and he was confident the institute would throw out the complaints.
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