MPs question Sanjeev Gupta’s management of Liberty Steel

An influential group of MPs has questioned Sanjeev Gupta’s management of Liberty Steel, Britain’s third-largest steelmaker, after identifying a “series of audit and corporate governance red flags” at the conglomerate. magnate.

MPs on Friday warned that Gupta must “urgently fix” GFG Alliance’s problems if he is to be considered a suitable owner of UK steel companies, and called for an urgent investigation into the GFG Alliance’s accounting firm. group.

The findings are part of a very critical report by the House of Commons Special Committee on Business, Energy and Industrial Strategy. The committee launched its investigation into Liberty Steel and the future of UK industry in April following the collapse of GFG’s biggest lender, Greensill Capital.

Gupta, once celebrated as the ‘savior of steel’ for his rescue of beloved steel mills from Wales to Australia, has since struggled to refinance his industrial empire which is also under investigation by the UK Serious Fraud Office.

“The systemic issues at the heart of GFG Alliance have highlighted Liberty Steel’s vulnerabilities and its place in the larger UK steel industry,” said Darren Jones, chairman of the committee.

Testimonies heard by MPs, he added, had “highlighted serious problems with high-risk financial practices, audit weaknesses and inadequate accountability and governance arrangements. company “within GFG.

Gupta “must resolve these issues urgently if it is to be considered a suitable and appropriate owner of steel companies in the UK”.

In their report, MEPs said GFG’s structure and governance had resulted in “no formal oversight or accountability” for decisions made by the industrialist, and urged ministers to reflect on “systemic risks to the industry. British “posed by such an unusual undertaking. structure.

The report called on regulators to investigate King & King, the small London-based accounting firm that audits dozens of companies owned by GFG as “a matter of pressing public interest.”

He said he found it “totally unconvincing” that the company, which has only six partners, has the “capacity, expertise or resources” to audit the accounts of several large companies GFG Alliance and Liberty Steel UK representing over £ 2.5 billion in revenue. ”.

The Financial Reporting Council declined to comment. The Institute for Chartered Accountants in England and Wales said its statutes prevent it from commenting if it investigates. King & King did not respond to a request for comment.

Politicians also criticized GFG for failing to release consolidated accounts showing the full financial position of all of the group’s companies.

They cautioned against the risks to the industry of using “high-risk financial financing practices, such as future receivables lending” to which Greensill and GFG are committed, and recommended that the Financial Conduct Authority and the Treasury are investigating their use.

MPs said they would welcome the government’s insolvency department, considering whether Gupta had acted in violation of his fiduciary duties as a company director. However, the investigative powers of the service are generally limited to situations in which a company has entered into formal insolvency proceedings.

The industrialist announced last month that it would inject £ 50million in new funding into its Yorkshire factories through a separate new entity, Liberty Capital.

MPs said they were aware of recent refinancing efforts, but said they disagreed with Gupta’s decision to “create another company to fund these companies.”

MPs said they welcomed the government’s decision in March to reject Gupta’s request for a £ 170million grant due to the opacity of corporate governance within the group. They urged ministers to consider formalizing an aptitude test for directors of private companies as part of any future steel deal.

Separately, MEPs said the government did not have a long-term roadmap for the sector and called for help on long-standing issues such as electricity costs.

GFG said it would “review and reflect” on the report’s findings. Gupta, he added, had “systematically fulfilled his obligations as a director of a private company”. The group was on a “journey to improve governance and transparency” and, while the pandemic and the Greensill collapse had “delayed progress”, it was now in a position to “accelerate these changes”.

The government said it was “determined to ensure a competitive future for the UK steel industry” and that in recent years it had provided “significant support, including more than £ 600million to reduce energy costs and protect jobs “.

He would “carefully consider the report’s recommendations,” added a spokesperson.

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