NEDs, heed the whistle

Non-executive directors must do more when faced with allegations of whistleblowing otherwise they could face disqualification, writes Simon Bevan of BDO Stoy Hayward

Simon P Bevan is head of BDO Stoy Hayward’s Fraud Services Unit. He can be contacted at email: simon.p.bevan@bdo.co.uk, or tel: +44 (0) 113 244 3839.

In a High Court decision in 2005 ( Secretary of State for Trade and Industry v Swan et al [2005] EWHC 603 (Ch)) two directors of a listed company, one a non executive, were disqualified. The case centred on their actions following receipt of allegations about a “crossfiring” or cheque “kiting” operation, a technique designed to artificially inflate an entity’s overall bank balance in order to provide a positive spin on a company’s balance sheet and working capital position.