DIRECTORS OF QUINTECH COMPUTER SERVICES LTD DISQUALIFIED

17 Jan 2003 12:45 PM

The managing director and finance director of Cheshire-based Quintech Computer Services Limited have been disqualified as directors because of their unfit conduct, following a DTI investigation.

The Secretary of State for Trade and Industry has accepted disqualification undertakings from Richard Pollit and Andrew Hamilton Budden who were involved in or aware of the manipulation of company accounting records and financial statements so that any profits were overstated and losses were understated, involving £1 million.

The company's published accounts were consequently misleading and failed to show a true and fair view of its trading results and financial position as required by company law - Section 226 of the Companies Act 1985.

Much of the manipulation, which occurred over a number of years from 1994, was achieved through premature recognition of profit on long term contracts for software development.

Profit was anticipated on the contract and taken in full long before it was appropriate to do so, and in some cases even before work had begun. A number of the contracts were eventually completed at a loss. When these losses could not longer be disguised, the company went into receivership in November 1998.

The investigation also found that managing director Mr Pollitt, who will be disqualified as a director for eight years, stood to benefit from the practice, as he had been granted share options which were determined by the reported profits of the company. It was planned to float the company's shares on the Stock Exchange or Alternative Investment Market which was expected to generate a substantial profit for Mr Pollitt.

Finance director Mr Budden, who will be disqualified as a director for four years, was initially employed as the financial controller of the company from January 1994, but was appointed to the board of directors on 24 October 1996.

NOTES TO EDITORS

1. The Secretary of State for Trade and Industry accepted disqualification undertakings from Andrew Hamilton Budden of 4 Brindley Park, Wheelock, Sandbach, Cheshire on 7th January 2003, which come into effect on 28th January 2003. She accepted disqualification undertakings from Richard Pollitt of 18 Sandiway Place, Altrincham, Cheshire on on 3rd January 2003 which come into effect on 24th January 2003.

2. Companies Investigation Branch ("CIB") is part of the Company Law and Investigations Directorate of the Department of Trade and Industry.

3. CIB carries out confidential enquiries under Section 447 of the Companies Act 1985 and, where necessary, takes further action in the name of the Secretary of State. This can include winding up proceedings in the public interest or disqualification proceedings against directors.

4. Section 8 of the Company Directors Disqualification Act 1986 allows the Court to make a disqualification order of up to 15 years for unfit conduct. On 2 April 2001, amendments were introduced by the Insolvency Act 2000 allowing directors, with the agreement of the Secretary of State, to avoid the need for a Court hearing by offering an acceptable disqualification undertaking. This has the same legal effect as a disqualification order made by the Court and usually includes a schedule identifying the director's unfit conduct. The consequences of breaching a disqualification undertaking are the same as those for breaching a disqualification order.

5. Contravention of a disqualification order or a breach of a disqualification undertaking is a criminal offence and may result in a fine or imprisonment for up to two years. Information relating to persons acting in contravention of this provision should be passed on to the Department on 0845 601 3546.

6. The Secretary of State accepted the disqualification undertaking based on the following unfit conduct with which Mr Budden agreed:

(a) That whilst a director of the company, in breach of his duties as such, accounts and accounting records of the company were produced and filed which showed significantly more profits (or fewer losses) than the company could truly or fairly be said to have earned (or incurred) at the time (This was referred to as "the scheme");

(b) Whilst he was not a de jure director of the company at all times, in breach of his duties as director he failed to take adequate steps to rectify or make provision for the entries which, to his knowledge, had been made in the accounts and/or accounting records of the company prior to his appointment and in furtherance of the scheme;

(c) For the avoidance of doubt it was alleged that accounts and/or accounting records relating to the following periods or lesser periods within them were manipulated pursuant to the scheme:

(1). the financial years ending 30 September 1994, 30 September 1995, 30 September 1996 and 30 September 1997 respectively, and

(2). the six months ending 30 March 1998;

(d) Further or alternatively, whilst a director of the company, in breach of his duties as such, he caused or permitted it:

(1). to produce monthly management accounts and annual financial statements for the relevant periods which by virtue of the said overstatement of profits (or understatement of losses) did not give a true or fair view of the company's profit or loss or the state of its affairs

(2). to maintain accounting records for the relevant periods which did not disclose with reasonable accuracy the financial position of the company from time to time.

7. The Secretary of State accepted the disqualification undertaking based on the following unfit conduct with which Mr Pollitt agreed:

(e) that whilst a director of the company, in breach of his duties as such, he failed to prevent a scheme whereby accounts and accounting records of the company were produced and filed which showed significantly more profits (or fewer losses) than the company could truly or fairly be said to have earned (or incurred) from time to time. ;

(f) For the avoidance of doubt it was alleged that accounts and/or accounting records relating to the following periods or lesser periods within them were produced pursuant to the scheme:

(1). the financial years ending 30 September 1994, 30 September 1995, 30 September 1996 and 30 September 1997 respectively, and

(2). the six months ending 30 March 1998;

(g) Further or alternatively, whilst a director of the company, in breach of his duties as such, he failed to prevent the company from

(1). producing monthly management accounts and annual financial statements for the relevant periods which by virtue of the said overstatement of profits (or understatement of losses) did not give a true or fair view of the company's profit or loss or the state of its affairs

(2). maintaining accounting records for the relevant periods which did not disclose with reasonable accuracy the financial position of the company from time to time.

Public Enquiries: 020-7215 5000
Textphone (for people with hearing impairments): 020-7215 6740 http://www.dti.gov.uk