Four directors in charge of car giant MG Rover when it collapsed with the loss of thousands of jobs face being banned from holding office again after a damning indictment in a long-awaited report.

Business Secretary Lord Mandelson said work has started to begin proceedings against John Towers, Peter Beale, John Edwards and Nick Stephenson, the so-called Phoenix Four.

They bought the Longbridge-based firm from BMW for a nominal £10 in 2000 and paid themselves £9 million each between then and April 2005 when the firm went bust, with the loss of 6,300 jobs.

They also stand to make a further £3.2 million each from share schemes and dividends, it was revealed by inspectors.

The official report into the saga, which runs to two volumes, more than 800 pages and cost more than £16 million, claimed that MPs investigating what happened were given "inaccurate and misleading information" by one of the four directors. The report also found evidence of questionable briefings to the press by Government officials.

Lord Mandelson said lawyers have already started work compiling evidence to bring proceedings against the four directors to prevent them holding company office in the future.

The former Rover directors immediately hit back. They said: "The report is entirely as we expected - a witch hunt against us and a whitewash for the Government. It drips with the hallmarks of this Government - spin, smear and point blank refusal to take any responsibility for their own actions. We criticised the Government for failing to help MG Rover. As we have seen elsewhere, there is a price to be paid for criticising this Government and for us the price is this report."

Inspectors revealed in the report that Mr Beale bought computer software to eliminate evidence the day after the Government announced the inquiry into Rover's collapse. Inspectors looked at explanations the four directors gave to a select committee investigating the saga, and found that Mr Beale gave "inaccurate and misleading" explanations.

The report described the financial rewards to the Phoenix Four as "unreasonably large". Bonuses were awarded by the directors to themselves for various "achievements" including "favourable performance of the company compared to the business plan" as well as establishing a joint venture partnership with a Chinese firm which did not proceed.

Justification given for the rewards was that they were comparable to the pay of young men in the City who were receiving substantial bonuses for contributing "very little", according to the report.