Insolvency Service
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Instant property millionaire companies finally shut down
A group of London companies controlled by the now bankrupt Mr Spencer Michael (see note 1 below) that promised to help investors become instant millionaires has been wound up in the High Court on grounds of public interest following an investigation by Companies Investigation Branch (CIB).
Potential investors were invited to attend free "Secrets 2 Success" seminars advertised with the line "no risk, no effort" and were encouraged to join with "little or no money" an "Instant Millionaire Programme." They were told they could learn more about becoming a property millionaire by attending further seminars described as "Negotiate 2 Win" at a cost of £1,000, the "No Money Down" course at a cost of £2,000 and the "Freedom 2 Fortune" course at a cost of £4,000.
Some people who attended these seminars then went on to borrow money, sometimes on their credit cards, and employed the services of the companies in order to invest in buy-to-let property.
Investors were told that Mr Michael was a specialist in the "buy to let" market with an estimated personal portfolio of £11 million. They were promised he would locate suitable properties for investment that were in the course of construction and by buying in bulk from the developers could negotiate significant discounts.
CIB's investigation discovered that the companies were being operated by Mr Michael as effectively one entity and with a complete lack of commercial probity. In particular there were:
- Inadequate records kept.
- Clients' money was paid into Mr Michael's personal accounts to fund his own property dealings.
- Clients' deposits were not returned for purchases that did not proceed.
- Failure to account for rents due to clients
- Misleading advertisements
- Misrepresentations as to the property discounts obtainable
- Insolvency and breaches of Consumer Credit protection
At least 30 investors were found to be owed nearly £1.6 million.
In ordering the companies into liquidation Mr Registrar Jacques stated the evidence made out a clear case that it was just and equitable to wind up the companies in the public interest.
Notes to Editors:
1. Mr Michael (the director and shareholder of the companies) was made bankrupt on 29 March 2007. This left the companies without any control other than the Official Receiver, as Mr Michael's trustee, who applied to the Court for directions. Mr Michael then claimed that, just prior to his bankruptcy, he had appointed a new director of the companies, Ms Marcela Frolikova, who then opposed the winding up.
2. Property Investors Courses Limited was incorporated on 17 September 2003. The registered office is at Allen House, 1 Westmead Road, Sutton, Surrey, SM1 4LA. The recorded directors are Mr Spencer Michael (from 17 September 2003), Ms Marcela Frolikova (from 20 March 2007) and Mr Danny Gray (from 2 July 2007). The secretary is Ms Marcela Frolikova (from 2 July 2007).
3. Spencer Michael Consultancy Limited was incorporated on 7 January 2004. The registered office is at Allen House, 1 Westmead Road, Sutton, Surrey, SM1 4LA. The recorded directors are Mr Spencer Michael (from 7 January 2004), Ms Marcela Frolikova (from 20 March 2007) and Mr Danny Gray (from 2 July 2007). The secretary is Ms Marcela Frolikova (from 2 July 2007).
4. A Company Voluntary Arrangement was agreed with creditors on 9 November 2005 but failed shortly afterwards when Mr Michael did not adhere to the terms of the proposal and paid only £5,000 to the supervisor of the arrangement.
5. Platinum Management & Marketing Limited was incorporated on 15 May 2003. The registered office is at Allen House, 1 Westmead Road, Sutton, Surrey, SM1 4LA. The recorded directors are Mr Spencer Michael, (from 15 May 2003), Ms Marcela Frolikova (from 20 March 2007) and Mr Danny Gray (from 2 July 2007). The secretary is Ms Marcela Frolikova (from 2 July 2007).
6. St Paul's Property Developments Limited was incorporated on 21 July 2004. The registered office is at Allen House, 1 Westmead Road, Sutton, Surrey, SM1 4LA. The recorded directors are Mr Spencer Michael (from 21 July 2004), Ms Marcela Frolikova (from 20 March 2007) and Mr Danny Gray (from 2 July 2007). The secretary is Ms Marcela Frolikova (from 2 July 2007).
7. St Paul's Property Company Limited was incorporated on 22 July 2004. The registered office is at Allen House, 1 Westmead Road, Sutton, Surrey, SM1 4LA. The recorded directors are Mr Spencer Michael (from 22 July 2004), Ms Marcela Frolikova (from 20 March 2007) and Mr Danny Gray (from 2 July 2007). The secretary is Ms Marcela Frolikova (from 2 July 2007).
8. Emerald Investment Group Limited was incorporated on 21 July 2004. The registered office is at Allen House, 1 Westmead Road, Sutton, Surrey, SM1 4LA. The recorded directors are Mr Spencer Michael (from 21 July 2004), Ms Marcela Frolikova (from 20 March 2007) and Mr Danny Gray (from 2 July 2007). The secretary is Ms Marcela Frolikova (from 2 July 2007).
9. PIC (UK) Limited was incorporated on 2 December 2003. The registered office is at Allen House, 1 Westmead Road, Sutton, Surrey, SM1 4LA. The recorded directors are Mr Spencer Michael (from 2 December 2003), Mr Alan Paul Finch (from 13 September 2005), Ms Marcela Frolikova (from 20 March 2007) and Mr Danny Gray (from 2 July 2007). The secretary is Ms Marcela Frolikova (from 2 July 2007).
10. A further company, St Paul's Property Group Limited, was ordered into liquidation in the High Court on a creditor's petition on 10 November 2005. The registered office is at 30 Finsbury Square, London, EC2P 2PY. The sole recorded director is Mr Spencer Michael (from 21 July 2004). No successor was appointed secretary following the resignation of the nominee secretary on 21 July 2005.
11. The petitions in the public interest to wind up the foregoing seven companies were presented in the High Court on 7 November 2006 under the provisions of section 124A of the Insolvency Act 1986 following confidential enquiries carried out by Companies Investigation Branch (CIB) under the provisions of section 447 of the Companies Act 1985, as amended. Since then a number of matters have deferred the hearing of the petitions until 29 April 2009 when the seven companies were all ordered into liquidation.
12. The companies opposed the winding action throughout. Delay in their filing evidence necessitated obtaining an unless order on 4 April 2007 requiring them to do so failing which they would be debarred from filing any evidence opposing the winding up.
13. On 25 October 2007 the Court ruled as a preliminary issue that Ms Frolikova had not been validly appointed. Ms Frolikova appealed to the Court of Appeal. Her appeal was dismissed on 14 July 2008. Ms Frolikova's application to set aside the Court of Appeal's order was dismissed on 22 January 2009.
14. In the meantime on 7 July 2008 an interim Bankruptcy Restriction Order was made against Mr Michael by virtue of which he is presently prevented from being concerned directly or indirectly in the management of a company without leave of the Court. The interim Order will remain in place until either, the determination of the application for the Bankruptcy Restrictions Order, or the acceptance of a Bankruptcy Restrictions Undertaking, or the Court discharges the interim Order. The next hearing of that matter will be in the High Court on 14 May 2009.
15. Since the winding up action commenced, two of the companies (Emerald Investment Group Limited and PIC (UK) Limited), whilst said to be opposing the winding up, were nevertheless dissolved through the voluntary striking off procedure. The Secretary of State sought and obtained orders restoring both companies to the register of companies and to wind up on grounds of public interest together with the other five companies. By virtue of the winding up orders the Official Receiver is liquidator of the seven companies.
16. Following the Court of Appeal's dismissal of Ms Frolikova's appeal on 22 January 2009 she has indicated through solicitors that she will be filing a complaint to the European Court of Human Rights.
17. The companies affairs were aired on BBC Watchdog broadcast on 22 March 2005 and a BBC documentary called Underground Britain, broadcast on 15 September 2005.
18. Companies Investigation Branch, part of the Insolvency Service, carries out confidential enquiries on behalf of the Secretary of State for Business, Enterprise & Regulatory Reform (BERR).
19. 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.
20. All public enquiries concerning the affairs of the companies should be made to: The Official Receiver, Public Interest Unit London, 21 Bloomsbury Street, London, WC1B 3SS, Tel No: 0207 637 1110. Email: piu.or@insolvency.gsi.gov.uk. Further information about the work of The Insolvency Service is available from http://www.insolvency.gov.uk
