Insolvency Service investigation leads to closure of property ‘investment’ company that raked in over £9m
Newbury Venture Capital Ltd, a Manchester-based company which made false and misleading claims in persuading members of the public to invest in residential properties, was wound up in the High Court on 11 February 2016, following an investigation by the Insolvency Service.
The company, in conjunction with the associated companies Hometrader Group Plc and Hometrader (North West) Ltd (collectively referred to herein as ‘the companies’), operated property investment schemes, including one known as the ‘Privilege Club’, in which members, after payment of a fee, were entitled to access a website listing properties for sale, ostensibly at discounted prices.
The properties were owned or sourced by the companies. Privilege Club members would pay a deposit of 25% of the purchase price with the balance of 75% to be financed by a buy-to-let mortgage. After purchase, the 25% deposit was intended to be returned to the investor as a discount on the purchase price. A separate Joint Venture scheme operated by Newbury Venture Capital Ltd allowed investors to invest in property (owned by one of the companies or the companies’ director) with the intention that the property would be renovated and sold, with the profits to be shared between Newbury Venture Capital Ltd and the investor.
The Court heard and accepted that the companies and the investment schemes had operated under the broad ‘Hometrader’ brand and that consequently it had not been possible to disentangle their trading activities. This confusion was compounded by the companies’ failure to maintain accounting records capable of explaining what funds had been received from which investors and how they had been used. From the incomplete records which were produced, it appears that at least 482 investors had invested £9.3m in the Joint Venture scheme and that there had been at least 228 members of the Privilege Club who had paid membership fees of up to £5,000 each.
The investigation found that:
- Joint Venture investors were promised a profit on their investment of 20-50% within 26 weeks or, if the property was not sold within this timescale, a refund of the initial investment plus £2,500.
- No evidence was produced by the companies to show that any investors in any of the schemes had made profits and all investors contacted by the investigators had, in fact, suffered losses having been unable to obtain a refund of their initial investment.
- Joint Venture investors were told that they would have security in the form of a legal charge over the properties purchased, whereas many of the investors were given no such security.
- Joint Venture investors were led to believe that they would be the only investor in relation to each specific Joint Venture property but the companies received investment funds from multiple investors in relation to the same properties.
- There had been no independent valuation of the properties prior to them being offered to investors and it was subsequently found that property values had been overstated.
- The intention in the Privilege Club scheme that members obtain a refund of the 25% deposit on the property price whilst obtaining a buy to let mortgage for the 75% balance, represented a potential fraud on the mortgage providers.
- There were substantial unexplained transactions with the companies’ director and connected parties.
Commenting on the case, Colin Cronin, Investigation Supervisor said,
In ordering Newbury Venture Capital Ltd into liquidation the Court found that the company had operated with both a lack of transparency and a lack of commercial probity, had adopted misleading sales practices and failed to keep proper accounting records.
When the company was challenged to show examples of investors who had made profits on their investments no such evidence was forthcoming.
These winding-up proceedings show that The Insolvency Service will take firm action against companies which are found to be operating against the public interest.
Notes to editors
Newbury Venture Capital Ltd (company registration number 07193172) was incorporated on 17 March 2010. The company’s registered office is at Woodhead House, 44-46 Market Street, Hyde, Cheshire, SK14 1AH. The company traded from 71-73 Long Street, Middleton, M24 6UN.
The petition to wind-up Newbury Venture Capital Ltd was presented under s124A of the Insolvency Act 1986 on 5 June 2015. The company was wound up on 11 February 2016 and the Official Receiver has been appointed as liquidator.
A public interest petition for the winding-up of Hometrader (North West) Ltd was presented on 5 June 2015 but was later withdrawn after the company was wound-up on the petition of HM Revenue & Customs on 14 September 2015. Hometrader Group Plc, was wound-up on a creditor’s petition on 1 December 2014. The Official Receiver was appointed as liquidator of both Hometrader (North West) Ltd and Hometrader Group Plc.
All public enquiries concerning the affairs of the company should be made to: The Official Receiver, Public Interest Unit, 2nd Floor, 3 Piccadilly Place, London Road, Manchester, M1 3BN. Tel: 0161 234 8531 Email: firstname.lastname@example.org
Company Investigations, part of the Insolvency Service, uses powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK on behalf of the Secretary of State for Business, Innovation & Skills (BIS). Further information about live company investigations is available.
The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. It may also use powers under the Companies Act 1985 to conduct confidential fact-finding investigations into the activities of live limited companies in the UK. In addition, the agency authorises and regulates the insolvency profession, deals with disqualification of directors in corporate failures, assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees, provides banking and investment services for bankruptcy and liquidation estate funds and advises ministers and other government departments on insolvency law and practice.
Further information about the work of the Insolvency Service, and how to complain about financial misconduct, is available.
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Published: 1 March 2016
From: The Insolvency Service