The metals tycoon Sanjeev Gupta should be investigated for potential breaches of his duties as a company director, according to a scathing report by MPs that said his leadership threatened the future viability of Liberty Steel. Liberty Steel has lurched through eight months of crisis after the March collapse of its key financial backer, Greensill Capital, triggered an ongoing attempt to find new lenders. Gupta controls Liberty Steel through GFG Alliance, an informal group of companies that employs as many as 35,000 people worldwide, including about 3,000 in UK steel. GFG has been the object of persistent concerns over its corporate governance, and the government in March rejected its request for a £170m bailout because of its opaque corporate structure. The UK’s Serious Fraud Office is also investigating “suspected fraud, fraudulent trading and money laundering” in relation to GFG and Greensill Capital. In their report, MPs on the business select committee flagged multiple areas of concern, stating: “We are not satisfied that Sanjeev Gupta is adequately addressing the many fundamental issues and concerns associated with the corporate governance, leadership, transparency, funding and operations of his businesses and remained concerned that this poses a threat to the long-term prospects of Liberty Steel UK.” The report flagged a series of issues, saying: Gupta may have breached his duties as a company director; Liberty Steel’s auditors should be referred for investigation; Frequent changes of auditors and accounting deadlines represented “red flags”; Liberty Steel employees were sometimes unable to perform their roles and duties. Darren Jones, the Labour MP who chairs the business committee, said: “Steel is a national strategic asset, a foundation industry, and a sector which the UK cannot afford to lose. “The evidence we heard during our inquiry has highlighted serious problems with high-risk financial practices, weaknesses in audit, and about inadequate accountability and corporate governance arrangements within GFG Alliance. Sanjeev Gupta must urgently fix these problems if he is to be seen as a fit and proper owner of steel companies in the UK.” Liberty Steel was last month able to restart operations at its plants in Rotherham and Stocksbridge, both in south Yorkshire, after a partial £50m refinancing. However, the MPs said they still had concerns over the lack of transparency over the funding terms. Their report called for the government’s Insolvency Service to examine “whether, on the basis of the evidence we have received, Sanjeev Gupta may have acted in breach of his fiduciary duties as a company director in the United Kingdom”. Among their other findings, the MPs also said Liberty Steel employees were “prevented from performing their roles and duties adequately” because of a structure that centralised crucial information and control with Gupta and GFG. This was “unacceptable” for such a large group, the MPs said. GFG and Greensill Capital, they said, used “high-risk financial practices” to fund the businesses, including lending based on “future receivables” – invoices that did not yet exist. Investigations have found Greensill loaned money to Gupta’s company based on notional future invoices for products which it had not yet sold. The report confirmed previous findings that Greensill Capital had lent £300m more than it should have to GFG companies under the government’s coronavirus large business interruption loans scheme, which was supposed to be limited to £50m per company or group. They said the Financial Reporting Council (FRC), the audit regulator, should refer the auditors of Liberty Steel companies, King & King, for investigation. The small firm had “a lack of capacity to complete audits effectively”, the report said. Milan Patel, a partner at King & King, previously told the committee his organisation was capable of auditing an organisation of GFG’s size and said the firm had “many clients who have hundreds of millions of pounds of turnover”. A GFG Alliance spokesman said the group would “review and reflect upon” the report’s conclusions, and added that the Liberty Steel had “a secure pathway to recovery”. “We are disappointed that the report fails to recognise the significant role Sanjeev Gupta and Liberty Steel has played in saving and safeguarding thousands of UK jobs which otherwise would have been lost,” the spokesman said. “Mr Gupta has consistently met his obligations as a director of a private company, and with the restructuring and transformation committee has led GFG’s global restructuring since Greensill’s collapse which has enabled the refinancing of our Australian operations and laid the foundations to achieve secure financing across the group.” King & King was approached for comment. Spokespeople for Grant Thornton, the administrators of Greensill Capital, and for Lex Greensill, the finance firm’s founder, declined to comment, as did the FRC. A government spokesperson said: “We are determined to secure a competitive future for the UK steel industry and in recent years have provided it with extensive support, including ​more than £600m to help with the costs of energy and to protect jobs. We are working closely with the sector to support its transition to a low-carbon future in a way that supports competitiveness, jobs and clean growth. “We recognise the critical role the steel industry plays in all areas of the UK and in our economy and will carefully consider the report’s recommendations.”