Gary MacDonald, 45, and Colin Thomson, 39, have been disqualified from acting as company directors for eight years and six years, respectively.

Inverness-based Highland Quality Construction, specialised in road building and had an annual turnover of £20m before collapsing with the loss of 138 jobs.

A probe by the insolvency service found that MacDonald was responsible for payments totalling £520,857 made to connected companies, despite a charge been served on HQC.

Seven items of HQC’s plant and machinery which were subject to finance were sold and the proceeds diverted to an associated business.

A further 10 items of machinery were sold without the consent of the finance company for £486,000.

Thomson was also in part responsible for some of these transactions.

The two directors disputed the findings but said they had drawn a line under the row due to escalating legal costs.

MacDonald said: “The past four years have been extremely difficult with the loss of the business and the on-going legal dispute.

“Although, we disagree with the conclusions of this process, I felt we were left with little choice but to reach settlement due to the financial strains of trying to clear our names.

“If we persisted to fight against this, our legal costs would have continued to spiral, so we decided that it was time to move forward and focus on the future rather than the past.”

Joanne Covell, a head of investigations, at the Insolvency Service, said: “Company directors are required to act in the best interests of the company.

“At a time when a company is insolvent and not paying its debts when due, the directors also have a duty to act in the best interests of the creditors.

“This is to ensure that creditors are treated fairly and in a transparent manner. Company assets should be handled in an appropriate manner, taking account of ownership and seeking to minimise potential losses to creditors.

“Directors that breach their duties will find themselves investigated by the Insolvency Service and could face a lengthy ban.”