Insolvency Service
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Investigation shuts business development network
Three companies that offered a business network development service, which targeted unemployed former middle and senior management executives, have been wound up in the High Court following an investigation by the Companies Investigation Branch ("CIB") of the Insolvency Service.
CIB's investigation found that BNG-UK Limited ("BNG"), aided by group companies BNG Associates Limited ("BNG Associates") and Business Network Group (UK) Limited ("Business Network Group"), had promoted a business network scheme. Members of the supposed network, mainly small businesses, would benefit from preferential contract terms when dealing with other network members and dealing with 'Associate' members of the network, such as accountants and solicitors offering professional services. The CIB investigation found no substantive evidence of the existence of any such network.
The main purpose of the scheme was to recruit 'Area Directors' to manage the network. BNG-UK targeted recruits through placing advertisements on the JobCentre Plus website and at nationwide JobCentre branches. Recruits were misled into believing that they were being offered salaried posts with salaries of up to £65,000. This was not the case in practice.
Recruits, in return for buying into the network scheme as Area Directors were expected to generate income through their own newly incorporated companies to attract in business network members and to offer strategic advice and management services to members.
Area Directors were asked to pay a licence fee to join the scheme, normally £18,000. The licence fee holder was said to be an American based principal licensor, whose identity was not revealed to any prospective and actual Area Director recruits. The licence fee holder was actually one of the group companies, Business Network Group.
The Area Director recruits were informed that they would not have to fund the licence fee themselves as the fee would be mainly funded by their newly incorporated company applying for a small firm loan under the Small Firms Loan Guarantee Scheme ("SFLGS"). The SFLGS is a joint venture between the Department of Business Enterprise and Regulatory Reform ("BERR") and participating lending banks. In the small number of cases where recruits did join the scheme and obtained loans for their companies via the SFLGS, all those companies have failed to generate any income via the network scheme, leaving the companies in potential default positions to the banks and the Government. In some cases the loans have been personally guaranteed by the recruits, who have found themselves once again out of work and now having to personally service their company loan repayments.
NOTES TO EDITORS
1. The registered office of Business Associates and Business Network Group is at 3 Caldene Avenue, Mytholmroyd, Hebden Bridge, West Yorkshire, HX7 5AF. The registered office of BNG-UK is at Endeavour House, Coopers End Road, Stansted, Essex, CM24 1SJ.
2. The petitions against all three companies were presented on 12th August 2008 under s124A of the Insolvency Act 1986. The companies were compulsorily wound up by the court on 12th November 2008.
3. The Insolvency Service carries out confidential enquiries on behalf of the Secretary of State for BERR through Companies Investigation Branch.
4. 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. The Service also 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.
5. All public enquiries concerning the affairs of the company should be made to the Official Receiver at Public Interest Unit, The Insolvency Service, 21 Bloomsbury Street, London WC1B 3SS. Public Enquiries 0207 637 1110. Email: piu@insolvency.gsi.gov.uk
6. Further information about the work of The Insolvency Service is available from: http://www.insolvency.gov.uk
