The collapse of Carillion plc in 2018 was a high-profile corporate failure in 2018, resulting in the loss of around 3,000 jobs and affecting 450 public sector projects, including hospitals, schools and prisons.
Disqualification proceedings were subsequently intimated against the former directors of Carillion by the Insolvency Service, following the investigations into the company's failure.
The three executive directors, CEO Richard Howson, CFO Zafar Khan and Group FD Richard Adam, have all since given disqualification undertakings, for 8, 11, and 12.5 years respectively.
More recently, the trial in the disqualification proceedings against the five NEDs, due to commence on 16 October 2023, was discontinued by the Insolvency Service on 13 October 2023. The Insolvency Service said proceedings were 'no longer in the public interest' and 'should be concluded by way of agreement and without the need for a trial or the associated expense.'
Solicitors for the NEDs commented that, if the Insolvency Service's claim had succeeded, it could have had serious and immediate consequences for corporate governance practices in the UK that would have impacted the willingness of individuals to act as NEDs of UK companies, particularly large and complex companies, due to the almost impossible standard of corporate oversight NEDs would then be expected to carry out.
Indeed, the fundamental difference between NEDs and executive directors is explained in the May 2018 parliamentary report produced by the Work and Pensions Committee and the Business, Energy and Industrial Committee. This notes that while Carillion's 5 NEDs had the same legal duties, responsibilities and potential liabilities under the Companies Act 2006 as their executive counterparts, the distinction is that NEDs are responsible for constructively challenging the executives responsible for the day-to-day running of a company.
Those acting as NEDs will be relieved by this outcome, but should ensure they exercise a high degree of scrutiny, and, where appropriate, challenge the directors and specialist advisors – and ensure such scrutiny is well documented.
