The Lemon Fool

Carillion liquidator files £1bn claim against accountants

The Official Receiver is understood to be advancing a legal claim against auditors of collapsed contractor Carillion that could target as much as £1bn in damages.

Sky News said the liquidators filed the claim on Friday.

AiY

AsleepInYorkshire wrote:The Official Receiver is understood to be advancing a legal claim against auditors of collapsed contractor Carillion that could target as much as £1bn in damages.

The Official Receiver is understood to be pursuing £230m of losses in the form of dividends it claims should never have been paid out by Carillion as it headed towards financial failure

Shareholders were left with net assets of £ nil but had the dividends as some form of compensation. The net worth of Carillion was in effect stated as minus £7 billion . Limited liability capped the shareholder's exposure to this a £ nil. .

The contractor went bust in January 2018 owing nearly £7bn.

That's an awful lot to hide away by creative accounting.

Alaric wrote:

AsleepInYorkshire wrote:The Official Receiver is understood to be advancing a legal claim against auditors of collapsed contractor Carillion that could target as much as £1bn in damages.

The Official Receiver is understood to be pursuing £230m of losses in the form of dividends it claims should never have been paid out by Carillion as it headed towards financial failure

Shareholders were left with net assets of £ nil but had the dividends as some form of compensation. The net worth of Carillion was in effect stated as minus £7 billion . Limited liability capped the shareholder's exposure to this a £ nil. .

The contractor went bust in January 2018 owing nearly £7bn.

That's an awful lot to hide away by creative accounting.

I lost a lot of money with 2 holdings in Carillion, having held on till the end. Don't tell me I am now expected to pay back any dividends I may have had in the fairly short time I held them; I haven't checked what I received but it would have been less than peanuts by comparison with the investment loss. Unbelievable! Perhaps we should have official auditors, paid rather less than the astronomical sums the big auditors pay themselves, who can be held to account so the shareholders don't suffer if the audits aren't up the scratch. It's their job to check that everything is as it should be. What else are they for? They should be held accountable. I'm getting to the stage where I can hardly bring myself to buy any shares as the chance of getting a positive return on my investment diminishes every day as the depressing news rolls in.

Bouleversee wrote:Don't tell me I am now expected to pay back any dividends I may have had in the fairly short time I held them;

The concept of limited liability resricts or limits the liability of shareholders to the amounts subscribed for the shares.

Had the auditors been more on the ball, they perhaps could have noticed that Carillion struggled to find the cash to make dividend payments. Stopping dividends may have been marginally benefecial to other creditors Against that, such an announcement might have accelerated the collapse.

Tell you what, I'll pay back all the dividends received from CLLN when the Directors pay back theirs along with their bonuses.

I'll write the cheque the very same day!

KPMG boss says he ‘cannot defend’ Carillion audits after record £21m fine

https://uk.finance.yahoo.com/news/kpmg-boss-says-cannot-defend-080138201.html

As an amateur investor, why waste time studying a companies accounts?

monabri wrote:Tell you what, I'll pay back all the dividends received from CLLN when the Directors pay back theirs along with their bonuses.

I'll write the cheque the very same day!

The liquidator may be trying to recover dividends from the directors where the directors declared unlawful dividends (and may be sued for the full amount of unlawful dividends they declared). In that case the directors indemnity insurance might have to pay up.

I doubt they will try and reclaim dividends from small private shareholders?

https://ndandp.co.uk/news-about-ndp/dir ... ification/

scrumpyjack wrote:

monabri wrote:Tell you what, I'll pay back all the dividends received from CLLN when the Directors pay back theirs along with their bonuses.

I'll write the cheque the very same day!

The liquidator may be trying to recover dividends from the directors where the directors declared unlawful dividends (and may be sued for the full amount of unlawful dividends they declared). In that case the directors indemnity insurance might have to pay up.

I doubt they will try and reclaim dividends from small private shareholders?

https://ndandp.co.uk/news-about-ndp/dir ... ification/

I've no idea if they can or will want to pursue private investors. However, and just a guess, they could possibly get all the details from electronic sources. They must be somewhere to be able to have paid the dividends. And there will be some "institutional" investors too.

AiY(D)

I think it is extremely unlikely that they will go after private investors. There are so many practical problems I can see (eg virtually all PIs will hold their shares via platforms so the share register will not show who the beneficial holders are). I doubt the court would find the shareholders liable as they received the dividend innocently and in good faith. Some shareholders will be dead, others unable to pay, others might be trustees etc etc. No that game really would not be worth the candle for the liquidators.

Far simpler to sue the directors and, in effect, their indemnity insurers.

ps the deepest pockets will be the auditors. KPMG's insurance cover will be very very large and deep.

I am not at all sure that insurers will pay up without a fight. This is in one form breach of fiduciary duty by the directors but at the same time it must be close to criminality and insurers will not/are not allowed to pay compensation for losses due to criminality. KPMG ought really to be hit as badly as Arthur Anderson were. They do not deserve to survive. OTOH I expect they will lose a lot of clients or fail to gain new ones as a result of this fraudulent action/corruption. Partners of accountancy firms are very well remunerated and it is disgusting the way they behaved and then they are shown leniency because they co operate?

When I think of the way as a director I used to be quizzed by auditors over piddling amounts it absolutely infuriates me.

Dod

scrumpyjack wrote:I think it is extremely unlikely that they will go after private investors. There are so many practical problems I can see (eg virtually all PIs will hold their shares via platforms so the share register will not show who the beneficial holders are). I doubt the court would find the shareholders liable as they received the dividend innocently and in good faith. Some shareholders will be dead, others unable to pay, others might be trustees etc etc. No that game really would not be worth the candle for the liquidators.

Far simpler to sue the directors and, in effect, their indemnity insurers.

ps the deepest pockets will be the auditors. KPMG's insurance cover will be very very large and deep.

I have heard nothing about the liquidators claiming that any dividends should be repaid. If they had the revenue reserves available then even if they had to borrow the cash to make the payment I would have thought that was within the bounds of legality even if extremely unwise.

I never held shares in Carillion. I would never have touched it with a barge pole.

Dod

Alaric reported above
"The Official Receiver is understood to be pursuing £230m of losses in the form of dividends it claims should never have been paid out by Carillion as it headed towards financial failure"

I guess the point is that the accounts were false (not a true and fair view) and the company did not in fact have the distributable reserves to pay out as dividends. The declaration of such dividends was therefore unlawful and the directors might be held personally liable for the unlawful dividends they declared.

scrumpyjack wrote:Alaric reported above
"The Official Receiver is understood to be pursuing £230m of losses in the form of dividends it claims should never have been paid out by Carillion as it headed towards financial failure"

I guess the point is that the accounts were false (not a true and fair view) and the company did not in fact have the distributable reserves to pay out as dividends. The declaration of such dividends was therefore unlawful and the directors might be held personally liable for the unlawful dividends they declared.

Actually Alaric was quoting from AiY who in turn cited a construction trade mag which is said to have been quoting Sky News. This £230 million is part of the claim against KPMG without any background so the alleged attempt to recovery dividends paid out by Carillion seems rather vague to say the least. I will be interested to see if/how it progresses though.

I am quite sure though that those lucky shareholders who were paid the dividends though will not be required to pay any of them back.

Dod

The £1bn claim has already been settled.

I am not aware that any details of this settlement have been published.

Crazbe7

Dod101 wrote:

scrumpyjack wrote:I think it is extremely unlikely that they will go after private investors. There are so many practical problems I can see (eg virtually all PIs will hold their shares via platforms so the share register will not show who the beneficial holders are). I doubt the court would find the shareholders liable as they received the dividend innocently and in good faith. Some shareholders will be dead, others unable to pay, others might be trustees etc etc. No that game really would not be worth the candle for the liquidators.

Far simpler to sue the directors and, in effect, their indemnity insurers.

ps the deepest pockets will be the auditors. KPMG's insurance cover will be very very large and deep.

I have heard nothing about the liquidators claiming that any dividends should be repaid. If they had the revenue reserves available then even if they had to borrow the cash to make the payment I would have thought that was within the bounds of legality even if extremely unwise.

I never held shares in Carillion. I would never have touched it with a barge pole.

Dod

If they had accounted for the contracts with a tad more prudence they possibly would not have had the revenue reserves.