A bathroom business owned by a senior East Lancashire councillor owed dozens of customers and creditors close to half a million pounds when it went bust in April last year.

The figure is revealed in a critical report by the liquidators which could result in Cllr Paddy Short, leader of Hyndburn Council's Green group, being disqualified from being the director of a public company.

The borough's Labour party has called on the Peel ward representative and his party colleague Cllr Caroline Montague, finance manager of Pure Style Bathrooms Ltd for more than two years, to resign as councillors.

Cllr Short, who currently serves as the chair of Hyndburn Council's Resources Overview and Scrutiny Committee, was elected as a Labour councillor in May 2016 and after a spell as an Independent switching to the Green Party in September.

A report on the Companies House website from joint liquidators Nick Morgan and James Kaye, of NTF Corporate Solutions, says: "The company was a bathroom and kitchen designers and installers.

"It struggled during Covid and could not continue to trade. The director decided to liquidate.

"On investigation it became apparent there were multiple transactions that needed further investigation.

"I contacted the director to query these and received some responses but not enough to get the bottom of this matter.

"As I could not get information I instructed Dylan Quail at Primus Law to seek repayment of the funds under investigation but to date this matter is outstanding.

"The statement of affairs anticipated £2,100 in preferential creditors.

"The statement of affairs included £12,000 owed to His Majesty's Revenue and Custom.

"The statement of affairs included 78 non-preferential unsecured creditors with an estimated total liability of £257,327.38.

"I have received claims from eight creditors at a total of £221,830.24.

"I have not received claims from 77 creditors with original estimated claims on the statement of affairs of £249,847.58.

"There is likely to be substantially more claims than anticipated as numerous creditors that were not included in the statement of affairs have made claims.

"I undertook an initial investigation into the customers' affairs to establish whether there were any potential asset recoveries or conduct matter that justified further investigation.

"Specifically I recovered, listed and reviewed the company's accounting records; obtained and reviewed copy bank statements for the 12 months prior to the company ceasing to trade from the company's bankers and compared the information in the company's last set of accounts with that contained in the statement of affairs lodged in the liquidation and made enquiries about the reasons for the changes.

"As detailed above there are several transactions that require further investigation.

"I have spent considerable time contracting the director for further information.

"I have appointed a solicitor to liaise with Mr Patrick Short. However the director has failed to co-operate with the solicitor and therefore they are unable to agree a settlement figure with the director to close the liquidation.

"Within three months of my appointment as liquidator I am required to submit a confidential report to the Secretary of State to include matters which have come to my attention during the course of my work which may indicate that the conduct of any part of present director would make them unfit to be concerned with the management of the company.

"I would confirm that report has been submitted."

The Lancashire Telegraph has consulted chartered accountants who believe this report is likely to recommend Cllr Short is disqualified from being a company director.

Mr Morgan declined to comment on the contents of the report to Business and Trade Secretary Kemi Badenoch.

A statement from the Hyndburn Labour party, issued by parliamentary candidate Graham Jones, said: "Hyndburn Labour is shocked at how damning the liquidators' report is.

"Cllr Short and Cllr Montague, the former finance manager at the business, have taken hundreds of thousands of pounds from local residents, many of whom are elderly and have been left totally devastated.

"Cllr Short has been unwilling to explain where all the money went.

"It’s clear from the liquidators' report that they have no credibility or integrity.

"Mr Short would not co-operate with the liquidators. They should resign from the council."

Cllr Short - who has previously told the Lancashire Telegraph that he voluntarily liquidated his company due to a serious and sudden mental breakdown - said: “I am in ongoing conversations with the liquidators over the differences of our records and continue to work towards a joint agreement.”

The Lancashire Telegraph has approached Cllr Montague, who was finance manager of the firm from May 22, 2017, to her resignation on October 14, 2019, for comment.

Hyndburn Council's Conservative leader Cllr Marlene Haworth and The Green Party nationally declined to comment.