The good, the bad and the downright ugly

As we come to the end of an inspiringly positive #TrusteesWeek, I am spending today (Friday 8th November) on a course delivered by NEDA for ICAEW members.

As I am an advisor to many Boards on finances and governance, and being a NED has similar attributes to being a Charity Trustee, I thought ensuring I understand their role and impact from a practical perspective, important. Also, as many Chartered Accountants like myself are on a fast track to being advisory service providers, not just compliance, tax and audit professionals, understanding the skills of business leadership and independent strategic thought is becoming more relevant than ever.

I am constantly enthused by people who give back, share skills and experiences, and support others whether this is for profit or, for social impact. Thankfully, I have an awesome network who feed my values of tolerance, empathy and connectivity almost daily.

The VAT return deadline yesterday brought unexpected challenges (and a very late night) due to two new clients being unaware of how much disorder was hiding in their bookkeeping. This is hugely disappointing, as both thought their previous accountant was doing a good job. Their ignorance caused (in my opinion) by lack of communication, challenged my positive nature.

This week's news has also brought to my attention the disqualification of a small business director, which reminds me that we're not all respectful and act with integrity.

Samantha Fairweather, the sole director of Essex-based Fairweather Construction Ltd, has been disqualified from serving as a company director for eight years, after it was discovered that her company took more than ￡300,000 in deposits for home improvement projects such as window and conservatory installations, it failed to deliver.

The company ceased operations in September 2022, owing creditors more than ￡700,000, including over ￡100,000 in unpaid taxes to HMRC.

Despite seeking advice from an insolvency practitioner in April 2022, when the company’s financial difficulties first became apparent, Fairweather Construction continued to accept payments from customers for new work it was unable to complete.

At the time of seeking advice, the company had already received more than ￡150,000 in deposits for incomplete projects. Nevertheless, a further ￡177,900 was collected from homeowners between April and the company’s liquidation later that year.

The situation was brought to light following an investigation by the Insolvency Service.

Neil North, Chief Investigator, said: "Samantha Fairweather knew, or ought to have known, that the company she was a director of had unpaid debts to HMRC and had been unable to fulfill its obligations to existing customers.”

The investigation also revealed Fairweather’s misuse of a ￡50,000 loan under the government’s Bounce Back Loan Scheme, which was introduced to support small businesses during the Covid-19 pandemic. Of the sum received, ￡11,000 was used to repay a director’s loan, a clear breach of the scheme’s guidelines, which required funds to be applied solely for the economic benefit of the business.

Lessons Learned:

• Thoroughly vet suppliers before paying over deposits.
• If you take deposits, ring-fence them.
• Do not enter into financial arrangements you cannot honour. Be realistic and honest.
• Ensure your company is resilient and can (within reason) weather the many storms that small business brings.
• Directors have fiduciary duties. They are responsible for knowing the up-to-date financial position of their company, and in particular, ensuring the utmost care regarding the actions and decisions they take when the company looks like it may soon be insolvent. If this is not your skill-set, engage with an accountant that supports you regularly, not just at year-end.
• Take advice as soon as you are alerted to indicators of solvency challenges. Most insolvency practitioners will give initial advice by phone, without obligation.

If you are concerned about the financial health of your business, or you need help obtaining up-to-date financial information on your business, please feel free to get in touch with us. We would be happy to help you.

If you are interested in being an NED or a Trustee, we'd equally be pleased to hear from you.