High Court orders £50 million phantom companies into liquidation

2 Feb 2016 05:32 PM

A web of ‘construction and civil engineering’ companies with reported combined sales of over £50 million and assets of £8.4 million, but run solely as instruments of fraud to obtain credit by filing false accounts and other false information, have been ordered into liquidation on grounds of public interest following an investigation by the Insolvency Service.

Petitions to wind up the companies were issued and presented by the Secretary of State for Business, Innovation & Skills, following confidential enquiries carried out by Company Investigations, part of the Insolvency Service.

The Court heard how some 15 ready made companies had been bought off the shelf from two company formation agents by a person calling himself Jonathan Hunting.

Although the companies were dormant and had never traded whilst under the control of the formation agents, when bought and activated by the new owner fictitious directors were appointed and the dates of their appointments back-dated by several years to the date of incorporation of the relevant company in order to lend legitimacy to the false accounts filed by the new owner reporting significant assets and trading since incorporation by some of the companies.

The companies had no physical presence at their registered offices located in different parts of the country and ostensibly each was independently owned and operated.

Typically this type of fraud can inflict losses on legitimate business of around £200,000 or in one recent case as much as $7 million by the company on that occasion dishonestly securing the supply of band width technology for text messaging services.

Welcoming the Court’s winding up decisions Chris Mayhew, Company Investigations Supervisor, said:

These supposedly unrelated companies had no legitimate purpose and existed solely to seek to obtain easily disposable goods on credit including expensive motor vehicles on lease finance with no intention of paying for them.

False accounts were filed by some of the companies to create the impression that they were substantial and credit worthy businesses and had been trading profitably for a number of years which the investigation found to be blatantly untrue. Where no trading accounts had been filed the first step, backdating the date of the director’s appointment, had been taken to continue with the fraud.

I would urge businesses approached for credit to question why a potential new corporate customer would choose to back date the appointment of its recorded officers and to file accounts showing significant trading and assets at a time when clearly the company was still on the shelf of the company formation agent dormant awaiting sale.

We work closely with a number of partners such as Companies House to prevent the abuse of the corporate regime by such deliberate lack of transparency and the Insolvency Service will continue to investigate and bring to a halt companies harming or about to harm legitimate business by operating in this way.

Notes to Editors:

The petitions to wind-up the companies were presented under section 447 of the Companies Act 1985, as amended.

The above two companies were purchased ‘off the shelf’ from the company formation agent by an individual called Jonathan Hunting (introduced by a Jude Baffoe) together with three other shelf companies that were similarly dormant and had never traded, namely: Ecophy Ltd (company registration number 07340875), which was subsequently dissolved on 24 March 2015 owing at least £17,214; Juno Consultancy Overseas Ltd (company registration number 07634668), which was subsequently ordered into liquidation on 11 May 2015 owing some £211,763; and Cabalian Baldwin & Co Ltd (company registration number 07686609), which was subsequently ordered into liquidation on 13 October 2015 on the petition of Mr Bafoe’s company claiming £99,405 for the supply of steel sections. The reported combined turnover of these three companies was purportedly some £18.3 million with total assets apparently of some £4.3 million.

On this occasion the company was purchased from a different company formation agent by the person calling himself Jonathan Hunting in April 2014 together with two other shelf companies, Colelane Limited and Haleborough Limited (each referred to below).

Mr Hunting had earlier purchased from the same agent a dormant shelf company called Glenster Limited (company registration number 07349123) in March 2014. That company was ordered into liquidation on 18 February 2015.The reported overall turnover of Glenster Limited was purportedly some £5.6 million with apparent total assets as at 31 August 2013 of just over a £1 million.

In September 2014 Mr Hunting purchased a further 10 shelf companies (each referred to below) from the same agent which again were dormant at the time having never traded whilst awaiting purchase.

The petitions to wind up the 15 companies in the public interest were each presented on 17 September 2015. The petition issued against Britannia Bespoke Ltd was supported by a steel supplier claiming £96,733 and which also supported the petition issued against Leonworth Limited claiming £81,144. The supporting creditor’s director Jude Bafoe was present at the hearing of the Secretary of State’s petitions and had earlier indicated to that his company was also owed money by Colelane Limited. Mr Bafoe’s company had earlier petitioned to wind up Cabalian Baldwin & Co Ltd (see above).

The public interest ground for winding up the 15 companies was that they were being used as vehicles for the commission of fraud.

In ordering the companies into liquidation on grounds of public interest on 28 January 2016 Mr Registrar Briggs said:

… in my judgement the Secretary of State’s case is made out … there is a deliberate attempt to hoodwink those who rely on documents filed at Companies House … the whole point of having an open registry is so that those accessing the register can rely on the accuracy of the information presented … the information laid before Companies House here is clearly false and this shows a complete lack of commercial probity … in my view it is just and equitable that the companies be wound up, and obviously so, and I do so order”.

Companies House deals with complaints about companies that fail to file documents like annual accounts or returns, or file fraudulent documents. If you suspect a company of breaking the law on the filing of documents, email the details to fraud@companieshouse.gov.uk

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 here.

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.

By virtue of the appointment of the Official Receiver all public enquiries concerning the affairs of the companies should be made to: The Official Receiver, Public Interest Unit , 4 Abbey Orchard Street, London, SW1P 2HT. Telephone: 0207 637 1110; email: piu.or@insolvency.gsi.gov.uk

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