“They put the integrity of the insolvency regime at risk”
The importance of using licensed insolvency advisors and professionals has been underlined by two recent cases investigated by The Insolvency Service.
They forced the closure of several companies that had facilitated the sale of struggling companies and encouraged directors to dispose of all their assets before selling, assuring them there would be no consequences for doing so.
In the first case Atherton Corporate (UK) Ltd and Atherton Corporate Rescue Limited traded under the Atherton brand claiming their services were “a legal alternative to using insolvency practitioners”.
According to the Insolvency Service they helped sell companies in financial distress, misled former directors by telling them they could keep their company’s assets, continue to trade the business through a new company and avoid any responsibility for its debts.
Five associated companies which supported the scheme by buying the distressed companies and appointing new directors have also been shut down.
Mark George, Chief Investigator at the Insolvency Service, said: “The Atherton companies told customers that resigning as directors before formal insolvency proceedings would remove the risk of reputational damage.
“However, neither company identified genuine purchasers for the businesses in financial distress but instead operated a scheme to help former directors and owners disassociate themselves from their company debts while retaining any assets.
“These actions would appear to have deliberately undermined the insolvency regime which is why the Secretary of State applied to have them and their associated companies wound-up in the public interest.”
Atherton also used websites called athertoncorporate.co.uk and nationalcompanyrescue.co.uk.
They charged clients depending on the level of their company’s liabilities. If they were greater than £500,000 then they would be charged £15,000 plus VAT.
The companies made several misrepresentations to prospective clients suggesting they could retain their company assets while transferring liabilities to the buyers without the risk of consequences.
They told customers there would be no requirement for former owners to cooperate with liquidators, insolvency practitioners or the Insolvency Service and that recovery action would not be taken against them by the new directors for any debts due by them to the company in financial distress.
Other misleading advice included claims that the new company could use the distressed company’s existing trading names without any need to pay for them and that the books and records of the distressed company could be disposed of after the sale.
They also advised potential clients that they could delay sending information to Companies House so they could continue to access the company’s bank accounts.
The main two Atherton companies were supported by five associate companies who supported the business model by purchasing the companies in financial distress and providing them with new directors.
They were called Aguia Group Ltd; GPA KLM Ltd; Namare GRP Ltd; Summers & May Ltd and TPG GRP Limited.
The companies in financial distress ceased trading shortly before or at the point of sale. The purchasing company and new directors existed in order to keep the company active for as long as possible to create a gap between the former owners and directors and any future liquidation.
The Official Receiver was named liquidator of Atherton Corporate (UK) Ltd; GPA KLM Ltd; Namare GRP Ltd; Summers & May Ltd and TPG GRP Limited following the winding-up of the companies at the High Court on Tuesday August 27th. Julie Tait of Grant Thornton UK was appointed liquidator of Atherton Corporate Rescue Limited and Aguia Group Ltd after those companies were wound-up at the Court of Sessions in Scotland on Tuesday August 13th.
In another case, a Manchester based company called Save Consultants Ltd was shut down in the public interest after investigators found it had been acting as an unlicensed insolvency practitioner.
They acted in a similar fashion to Atherton and despite claims of working in the insolvency industry for years, none of their current or former directors were licensed insolvency practitioners.
Save Consultants were wound up at the High Court in Manchester on Tuesday July 2nd.
David Usher, Chief Investigator at the Insolvency Service said: “Save Consultants claimed to offer services to the public which put the integrity of the insolvency regime at risk.
“They were offering the services of an insolvency practitioner without the authority to do so.
“The company and directors failed to co-operate with our investigations or provide any explanation for their business dealings which is why we have taken this robust action to prevent them from trading in the future.”
Their websites claimed that directors could sell their companies within 48 hours for a one-off payment. Despite listing services including debt restructuring and creditor negotiations, there were no details about what would happen if companies were sold, how Save Consultants would deal with liabilities or how company directors would avoid being held to account for their actions.
Chris Horner, insolvency director with BusinessRescueExpert, said: “One of the cast iron laws of business and life is that if something seems too good to be true then it probably is.
“So you can see why directors under financial duress would be eager to hear messages from unlicensed advisors telling them they would have no financial or legal obligations if they engaged their services.
“Unlicensed advisors tend to use social media and direct marketing tactics to target businesses that have encountered financial problems. They might then offer to buy business share capital in order to relieve and shield directors of their liabilities and debts.
“They would then usually make an offer to facilitate, for a fee of course, the sale of the distressed company to a firm that they are linked with that will absolve directors of any responsibility and protect them from any subsequent consequences.
“Unfortunately for the directors, these promises are often completely false but many businesses will continue to risk their futures and reputations by using these unlicensed services.
“Our advice for any business undergoing financial challenges to speak to a licensed insolvency practitioner in the first instance.
“You might not end up working with them but they will always let you know what you can and can’t do and will also be straight with you about the consequences of trying to avoid responsibilities – even inadvertently.
“Any business owner that hears that they should avoid engaging with licensed insolvency practitioners should consider this a legitimate red flag.
“This is important to know. The Insolvency Service has increased powers to go after directors who dissolve their businesses to avoid paying debts. The penalty for improperly dissolving a company is a ban of up to 15 years and or prosecution in serious cases.
“Hiring a rogue insolvency advisor will put you at risk of breaching these laws.”
BusinessRescueExpert is regulated by the Insolvency Practitioners Association, is a member of R3, the insolvency industry trade body and is a member of the Turnaround Management Association so has multiple levels of accountability and responsibility.
We also offer a free initial consultation to any director or business owner that wants to discuss their situation with a licensed insolvency practitioner.
Get in touch today knowing that you’ll be dealing with real experts with the qualification and licence to prove it.