Wonderkid investigation rings alarm bells for directors

February 27, 2024

Insolvency Service investigators aren’t only called in after the event. They can also examine complaints about alleged corporate abuse or fraud in live companies.

As is so often the case, two issues always put directors’ behaviour under the microscope: not conducting at arm’s length any transactions between the company and other entities controlled by the same directors; and lack of cooperation with investigators.

A recent case has brought these issues into sharp focus, two finance companies having been wound up in the public interest after misleading people into investing a total of at least £3 million in an unprotected bond scheme.

Satchi Holdings PLC promised safe investments in asset-backed loan notes paying up to 9% interest, but investors received minimal interest payments and no return of their investments. Satchi and a connected company, Hartreel Ltd, were wound up at the High Court on 30 January following a fraud investigation by the Insolvency Service.

London-registered Satchi was run by brother and sister Michael Haston and Jennifer McQueen. Hartreel registered in Bridgend, Wales, was run by Haston, once described as a ‘wonderkid’ investor based in Edinburgh. In 2020 Haston was reported in the media as having invested £2m in a government-backed spaceport in ­Shetland through another of his ventures, Leonne International. The Financial Conduct Authority had previously issued a warning to investors about Leonne.

Investors in Satchi Holdings PLC were told that their investments were protected by the Financial Services Compensation Scheme (FSCS), and that  Satchi was backed with assets of £34m. In November 2021, Hartreel Ltd bought Satchi Holdings PLC’s assets and in December 2021 they informed investors that the company would be repaying all investors early. However the last interest payments investors received were between April 2020 and January 2022.

The Insolvency Service discovered that Satchi Holdings had lent money to four companies associated with Haston, and therefore the transactions were not conducted at arm’s length due to either his directorship or his involvement in both loaning and receiving the funds. Only £200,000 was loaned legitimately.

Investigators discovered that investments were not backed by FSCS protection and there was no evidence that any security had been given for the money that was loaned. Directors had also failed to appoint a company secretary for Satchi Holdings, and failed to provide business records, both breaches of company law.

Owing to Haston and McQueen’s failure to cooperate, investigators were unable to identify the total amount that members of the public had invested, and could find no evidence of the £34m of assets. The Insolvency Service said that “Removing these rogue companies will protect the public from further harm.”

The Satchi tale is clearly tragic for several innocent investors who have typically lost tens of thousands of pounds – in some cases, their life savings. Seeking professional advice before committing to this ‘investment’ may still not have deterred them.

However, for directors sailing close to the wind, particularly in relation to transactions with closely related companies, the warnings of professional advisers should be heeded closely. The number of cases sent to the Insolvency Service’s compliance and targeting department has been more than doubling month-on-month in the last year, for post-insolvency examination, at any rate.

Companies already working with insolvency practitioners to keep struggling businesses afloat, or simply to restructure fundamentally healthy ones, must consider very seriously the treatment of funds received from the general public – not only for investment purposes, but for any orders and purchases at risk of not being fulfilled, for whatever reason. Where related companies are involved, at the very least consider the ‘optics’, although both the spirit and letter of the law on such transactions are very clear.

Written by Runita Kholia, Senior Analyst at Buchler Phillips, a UK based independent boutique firm with an impeccable Mayfair heritage, specialising in corporate recovery, turnaround, restructuring and insolvency.

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