Stuart Anderson says he was unable to feed his family when business venture, security firm Anubis Associates, went into administration in 2012.
The parliamentary candidate for Wolverhampton South West has come under fire after it was revealed he received an illegal dividend of more than £54,000 when the business owed £271,000 in tax.
He insists he was fully compliant with the law and ended up losing his house when the firm encountered difficulties.
A dividend is deemed unlawful when a company has insufficient profits to cover the amount paid. Despite its title, receiving an illegal dividend is not a criminal act.
Mr Anderson, who has been joined on the campaign trail in Wolverhampton by Foreign Secretary Dominic Raab and Chancellor Sajid Javid, was among directors who are believed to have had personal guarantees of around £250,000 in the company.
The former squaddie spoke publicly about how Anubis ran into difficulties in his first interview as a candidate in February this year.
The firm went into administration in December 2012 and was bought out by private investors who ran it for another year.
'Half a story'
Responding today to the claims, which surfaced in The Guardian newspaper, he told the Express & Star: “It’s half a story.
“They did not mention that I had personal guarantees against the business, or that I ended up losing everything and had to start from scratch.
“When there was profit in the business we took a dividend, but when there was no profit, we didn’t.
“I couldn’t feed my family. We lost everything, including my house and I ended up using a food bank.
“It was painful, but I have never hid away from what happened and have spoken many times about it.
“I use it as an example of how it is important to dust yourself down and move forward, whatever happens in life.
“Absolutely everything we did, we complied with the rules and made sure that everything was above board.”
According to official documents, Mr Anderson received a dividend of £54,458 in April, which administrators said should not have been paid.
He repaid £2,000 of it following an agreement with administrators in August 2013.
Mr Anderson, a former British Army sniper who served in Bosnia, Kosovo and Iran among other countries, now runs security business eTravelSafety.
The father-of-five moved his family to the city from Hereford earlier this year in a bid to win Wolverhampton South West for the Tories.
He added: “At the start of this campaign I signed up to a clean campaign pledge which I will be sticking to.
“Sadly that may not be happening everywhere.
“One of the reasons I got involved in politics is that people are fed up of politicians. “We’ve got to bring that trust back, so no matter what they throw at me, I’m going to make sure that I stay true to my beliefs.”
The other candidates for the seat are Labour’s Eleanor Smith, Leo Grandson for the Brexit Party, and Lib Dem Bart Ricketts.