Three former directors of Ethical Forestry Limited have received prison sentences totalling 15 years and nine months after pleading guilty to fraudulent trading in connection with a £70 million investment scheme. All three have also been disqualified from acting as company directors for ten years.
The case is a significant example of how serious misconduct in the management of a company can result in consequences extending well beyond the company itself. Directors can face criminal prosecution, lengthy periods of director disqualification and proceedings aimed at recovering assets.
For directors more generally, however, an investigation or allegation of misconduct does not itself establish wrongdoing. The important distinction is between ordinary commercial failure, mistakes in management and evidence of deliberate dishonest conduct.
What happened in the Ethical Forestry investment fraud case?
According to the Serious Fraud Office’s 3 September 2026 announcement, Ethical Forestry Limited was involved in a seven-year investment fraud affecting more than 3,000 people and involving approximately £70 million.
- The SFO said members of the public were cold-called and encouraged to transfer savings from pension schemes into a tree-planting investment in Costa Rica.
- Trees were planted, but the SFO found that no money had been set aside to maintain or commercially harvest the trees. As a result, the investment could not produce the returns investors had been promised.
The three former directors pleaded guilty to fraudulent trading in January 2026. At Southwark Crown Court on 3 September 2026, they received individual prison sentences of six years, five years and three months, and four years and six months. Each was also disqualified from acting as a director for ten years.
What is fraudulent trading and when can directors be personally exposed?
Fraudulent trading is a criminal offence under section 993 of the Companies Act 2006.
The offence applies where a company’s business is carried on with an intention to defraud creditors or for another fraudulent purpose and a person knowingly participates in carrying on the business in that way. It can apply whether or not the company is being wound up.
This is an important distinction for company directors. A business making losses, becoming insolvent or ultimately failing does not automatically amount to fraudulent trading. The criminal offence requires fraudulent intent and knowing participation.
Where evidence does support deliberate fraud, however, the consequences can be severe. A conviction on indictment under section 993 can result in imprisonment as well as a fine.
Directors should therefore understand their wider duties and responsibilities as company directors, particularly where a company is facing financial difficulty or questions are being raised about how company money has been used.
Why can fraudulent trading also lead to director disqualification?
Criminal liability and director disqualification are separate consequences.
Under section 2 of the Company Directors Disqualification Act 1986, a court can make a disqualification order where a person is convicted of an indictable offence connected with the promotion, formation, management or liquidation of a company. In cases dealt with outside a court of summary jurisdiction, the maximum period of disqualification under this provision is 15 years.
In the Ethical Forestry case, each of the three former directors received a ten-year disqualification alongside the custodial sentence.
Disqualification imposes significant restrictions on an individual’s future involvement in company management. Directors concerned about allegations of misconduct should understand that the underlying facts can sometimes create several different forms of exposure at the same time.
Our director disqualification solicitors advise directors at different stages of the disqualification process, including where allegations form part of wider insolvency or enforcement proceedings.
Can assets still be recovered after directors have been convicted?
Yes. A criminal sentence does not necessarily bring all financial proceedings connected with fraud to an end.
The SFO has confirmed that its criminal investigation into Ethical Forestry Limited has concluded, but that its proceeds of crime case continues. It has also stated that it will seek to recover assets from the convicted defendants, with information from victims being provided to the court for consideration in relation to compensation.
This is different from a civil claim by a liquidator or administrator against a director.
In an insolvency, an office-holder may separately investigate transactions and the conduct of directors to determine whether civil recovery claims should be pursued. Depending on the circumstances, these can include claims concerning misfeasance, directors’ loan accounts, transactions at an undervalue or other alleged breaches of duty.
Directors facing this type of civil action can read more about claims brought by liquidators and administrators against directors.
The important point is that criminal confiscation, director disqualification and civil recovery proceedings are distinct legal processes. The existence of one does not mean that another will automatically follow.
What should directors take from this case if their conduct is being investigated?
The Ethical Forestry prosecution involved deliberate fraudulent conduct established through guilty pleas. It should not be treated as representative of ordinary company insolvency or business failure.
However, it does illustrate why directors should take scrutiny of company conduct seriously.
- Where questions arise about company money, investments, payments to directors or transactions with connected parties, directors should ensure that the factual and documentary position is properly understood. Board minutes, accounting information, contracts, professional advice and contemporaneous correspondence can all become important when decisions are reviewed later.
- Directors should also avoid assuming that resigning from a company removes the risk of scrutiny over earlier conduct. Investigations frequently concern decisions made months or years before formal proceedings begin.
- Where a company is under financial pressure, directors can protect their position by making properly informed decisions, maintaining accurate records, documenting the reasons for significant transactions and obtaining professional advice where necessary.
Early attention to these issues is not an admission that anything has gone wrong. It helps establish what happened, why decisions were taken and whether any allegation against the director is properly founded.
Francis Wilks & Jones advises directors facing allegations concerning director misconduct, insolvency investigations, claims against directors and director disqualification throughout England & Wales.
