Insolvency Service
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Cheshire franchise group of companies closed down
Five related companies based in Macclesfield offering sub-prime financial and other business franchise opportunities have been closed down on grounds of public interest following the findings of an investigation by Companies Investigation Branch (CIB) of The Insolvency Service.
Five related companies based in Macclesfield offering sub-prime financial and other business franchise opportunities have been ordered into liquidation in the High Court on grounds of public interest following the findings of an investigation by the Companies Investigation Branch (CIB) of The Insolvency Service.
The investigation found, and the Court agreed, that franchisees were taken in by false and misleading statements and that the companies were operated by the directors Mr Christopher Lake (also known as Mr James) and Mr Stephen Knight (also known as Mr Graham) with a serious lack of commercial probity.
Prospective franchisees were invited to invest by wholly inflated and unrealistic part time earnings projections of up to £100,000 a year and by misrepresentations that they would be joining a long established and successful business that was:
“part of the FSUK Group, with over 22 years experience in the industry. Due to the fantastic growth we are now expanding further wit this exciting franchise”.
There was and is no FSUK Group. The recent incorporation on 18 September 2008 of a company called FSUK Group Limited by Mr Lake and Mr Knight after the commencement of the winding up action did not meet the Secretary of State’s concerns.
The franchise “success story” in testimonials by Ms Amanda Jackson (Mr Lake’s wife) and accompanied by a photograph of her next to a Ferrari was untrue.
Far from being a successful legitimate business, the primary company, Charter Financial Solutions Limited, was loss making and its running costs were met from the fees paid by franchisees. At least 27 franchisees were persuaded to invest some £120,000. The recorded commission earnings they subsequently earned in total amounted to just £450.
In ordering all five companies into liquidation in the public interest Sir Edward Evans-Lombe (sitting as a Judge of the High Court), stated that the Secretary of State’s allegations were well founded and that
“It seems to have been part of the business philosophy of these two gentlemen that it was legitimate in starting a new business to attempt to conceal past business history. Each of them practiced this, as can be seen from their use of different names described in the background facts described above, and it will be remembered that one of the services offered by CFS to its customers was assistance in effecting a change of name … I echo the view of the Adjudicator of the OFT” (see Note 9).
The Insolvency Service Chief Executive, Stephen Speed said:
“We are determined to crack down on the minority of rogue companies like these that prosper by false promises and by exploiting honest people. The public need to be on their guard against the activities of unscrupulous operators and this verdict sends a clear message that we will take action to close them down”.
Notes to editors
Notes to Editors:
1. Charter Financial Solutions Limited was incorporated on 19 August
2005. Its registered office is at Charter House, 1-3 Charter Way, Maccelsfield, SK10 2NG. The directors of the company are Mr Stephen Knight and Mr Christopher Lake (who is also company secretary).
The company was without officers from 21 November 2007 until 12 November 2008 when Mr Knight and Mr Lake were re-appointed.
2. Charter Financial Solutions (UK) Limited was incorporated on 18
September 2007. Its registered office is at Charter House, 1-3 Charter Way, Macclesfield, SK10 2NG. The directors of the company are Mr Stephen Knight and Mr Christopher Lake (who is also company secretary).
The company was without officers from 1January 2008 until 13 November 2008 when Mr Knight and Mr Lake were re-appointed.
3. Finance Select (UK) Limited was incorporated on 11 July 2007. Its
registered office is at Charter House, 1-3 Charter Way, Macclesfield, SK10 2NG. The directors of the company are Mr Stephen Knight and Mr Christopher Lake (who is also company secretary).
4. Bounce World Limited was incorporated on 24 May 2007. Its registered
office is at Charter House, 1-3 Charter Way, Macclesfield, SK10 2NG. The directors are Mr Stephen Knight and Mr Christopher Lake (who is also company secretary).
5. Trash Express Limited was incorporated on 23 July 2007. Its registered
office is at Charter House, 1-3 Charter Way, Macclesfield, SK10 2NG. The sole director of the company is Mr Christopher Lake, his wife Mrs Amanda Lake having resigned as director and secretary on 15 May 2008.
The company was without officers from 15 May 2008 until 11 November 2008 when Mr Lake was re-appointed a director.
6. Charter Financial Solutions Limited commenced trading in October 2005
as a broker in the sale of financial products to the public with the promise of obtaining guaranteed finance claiming that its customers “are approved regardless of their credit history”. This statement was false and in breach of the Consumer Credit (Advertisements) Regulations 2004.
7. The company recruited sales agents and also sold franchises in the business for £5,995 plus VAT. After County Court judgments had been
obtained by three dissatisfied franchisees leaving the company too hobbled to continue the business was moved in late 2007 into Financial Solutions UK Limited.
8. Financial Solutions UK Limited also offered assistance with debt management, the setting up of individual voluntary arrangements and setting up overseas bank accounts in countries such as Belize, Cyprus and Tanzania. Franchises in the business were sold by the company, this time for £6,595 plus VAT. Another company, Charter Financial Solutions (UK) Limited,
had initially been the intended successor company to Charter Financial Solutions Limited but in the event did not trade.
9. The Office of Fair Trading brought action to revoke Consumer Credit Licences issued to Charter Financial Solutions Limited and Financial Solutions UK Limited. False information was given to the OFT which noted that the group of consumers with which these companies dealt was potentially very vulnerable and that they were entitled to expect complete honesty, transparency and fair business practices from licensees. At a hearing on 31 January 2008 before an Adjudicator appointed under the Consumer Credit Act 1974 to hear evidence from both companies he observed that:
“the record of deceit, contravention, transgression and unfair business practices outlined above indicates a business and a set of directors (Mr Graham and Mr Lake) who are quite prepared to act beyond the boundaries of the law and regulation until they are either forced to stop or significantly alter their business practices”.
10. The two other companies, Bounce World Limited and Trash Express UK Limited, were also marketed in a misleading way to the public, the former offering franchise opportunities in bouncy castles and the later in rubbish collection.
11. The petitions to wind up the five companies in the public interest were issued in the High Court on 6 August 2008 under section 124A of the Insolvency Act 1986. Mr Lake and Mr Knight on behalf of the companies opposed the action taken and, after a four day contested trial in March 2009, judgment was handed down on 22 May 2009 and the companies were all ordered into liquidation.
12. Companies Investigation Branch carries out confidential enquiries on behalf of the Secretary of State for Business, Enterprise & Regulatory Reform (BERR).
13. 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 authorizes 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.
14. All public enquiries concerning the affairs of the companies should be made to: The Official Receiver, Public Interest Unit North 2nd Floor, 3 Piccadilly Place, London Road, Manchester, M1 3BN. Telephone No: 0161 234 8531. Email: piu.north@insolvency.gsi.gov.uk.
15. Further information about the work of The Insolvency Service is available from http://www.insolvency.gov.uk/
16. Media enquiries should be directed to: Lorna Dennis, Communications Manager, Insolvency Service, 21 Bloomsbury Street, London, WC1B 3QW. Telephone: 020 7637 6279 or Ade Daramy, Press Officer on 020 7596 6187.
