The saga that was Giftgaming enters its final stages - Seedrs investors should be unhappy.

Useful things brooms. Giftgaming has chosen a VML for its demise, or as the Liquidators have described it, a 'solvent liquidation'. Hmmm......

We have written far too often about Giftgaming. Nick Hatter the CEO has been at the centre of  this collapse. 

Now he has signed a declaration of solvency which shows no regard to Seedrs investors whatsoever. 'Creditors' under our current system does not include shareholders. Given that they are clearly creditors with the rise of equity CF, much the same as banks with O/S loans are, the law needs changing.

Seedrs have admitted to their customers, the investors, that there is no hope of them getting any money back. They claim to have made efforts to get some action from the Insolvency Service but the Service said NO. So now they say they just want this closed asap. 

Meanwhile out on the street, Seedrs investors are left High and Dry. OK, so its not a large sum but Seedrs promoted this company twice to its clients. How hard they tried to resolve this for their investors is an open to question - they certainly do not want to prolong what has been an awkward mess.

But that is where the broom comes in. 

Our Insolvency Laws are not fit for the 21st Century

The golden rule for administrations and liquidations is that the insolvency practitioners must maximise the return from the sale off the failed company's assets, for creditors. In a age when the public have easy access to investments in these companies, this is no longer the right way to do things.

 

There are several ongoing cases live as we write, where the public, who invested via one of the UK's much lauded equity crowdfunding sites, have to watch on as the directors of the failed company buy back the assets of the company for 2p, to then relaunch the brand shorn of its creditors and nowadays its mutilple investors. More often than not the amount the investors have lost is far greater than the amount owed to creditors.

What this situation creates is an easy out for insolvency companies. We now have two live cases where the practioners did not know that there were any investors involved. One had investments in ordinary shares issue via Crowdcube of around £1m over 4 years and the other investments of a similar sum. In the first company the Statement of Affairs which is prepared by the failed company, showed ordinary equity of just £7,000. Even the shareholder we act for had his record of investment declared as the wrong number. The CEO just didnt care. 

The directors of the failed companies misrepresented the facts in Statement of Affairs and the liquidators are not bothered to check this. If it had not been for our involvement, they would have liquidated the companies without realising how much money the founders had lost. That cannot be right. We understand caveat emptor but this is just crazy. 

Insolvency practitioners get paid a fixed sum and do not like to spend time on 'unnecessary' due diligence. There is nothing better for an IP than a pre pack - easy money. They love them and we hate them. One of the ones we are currently involved in, told us that investors were not their concern - well they should be.

Now equity crowdfunding exists and the Government has backed it almost to the point of blindness, surely we need a rethink. If only to try and stop the abuse of the system by greedy individuals who have no regard for the rights of the people who invested, in good faith, in their businesses. And there are plenty of them filling their boots on Crowdcube et al. We have the records and they will be on the new ECf.Buzz site for members to be amazed by.

It is not the first instance where we find the exponential progress in technology leaving behind our arcane legal system. Time to crack this nut.

Insolvency Service get it wrong again over Solar Cloth Co

The UK Insolvency Service has looked at the dealings of the Director of The Solar Cloth Company and decided that they do not warrant any action. 

No that is not a joke. 

You may remember the SCC. It helped itself to loads of investors cash using false information about the founder and his previous antics. The story was well written up in The Times. It was a caste iron case of fraud - all helped out by the Crowdcube platform.

Now in letting this individual go, without any reprimand the Insolvency Service quotes Section 6 of the Company Directors Disqualification Act 1986 where in order to be disqualified, said director has to have acted in a way that makes him unfit to be a company director. Text below -

Dear Sir/Madam, 

The Solar Cloth Company Limited Company Directors Disqualification Act 1986 I refer to previous correspondence in this matter and advise that as a result of the investigation undertaken, the Secretary of State does not propose to take disqualification proceedings against the directors of the above company. Such disqualification proceedings when brought are done so pursuant to Section 6 of the Company Directors Disqualification Act 1986. 

Whilst this may not be currently relevant to you it might be helpful for the future if I advise you of the wording of that section. 

It says: (1) The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied — (a) that he is or has been a director of a company which has at any time become insolvent (whether while he was a director or subsequently), and (b) that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of any other company or companies) makes him unfit to be concerned in the management of a company”. 

Accordingly if, in the future, the Secretary of State should learn of any unfit conduct relating to this company it could be included in any disqualification proceedings brought in respect of this or any future company failure. 

Yours faithfully Naomi Fulford 

Well if this guy has not acted in such a way then we are not going to see any companies' directors disqualified ever again. Also, it seems unlikely the company will be able to oblige the Secretary of State in the final comment as it no longer exists! What a ridiculous outcome.

So just beware the presence yet again of one Perry Carroll or whichever name he chooses from his list. He'll be the one flying some amazing money spinning business and asking for your cash.

We wrote about him and SCC here

Clearly something needs to done about the 1986 Act - yet another piece of useless legislation that pre dates the mass use of the internet. Just WAKE UP will you please.