A group of seven companies have been wound up after running a sophisticated racket that aimed to circumvent insolvency laws.
Atherton Corporate (UK) Ltd and Atherton Corporate Rescue Limited advertised their services as ‘a legal alternative to using insolvency practitioners’. But an investigation by the Insolvency Service found that their modus operandi was in direct contravention of insolvency regulations, promising directors of distressed companies that they could sell their company and absolve them of responsibility for debts while allowing them to keep hold of remaining assets.
The two firms used a network of five associated companies to act as buyers for businesses facing insolvency. Directors were told to resign prior to the sale and dissociate themselves from the business – but were told they could keep hold of assets and carry on trading as a new entity without any comeback.
The distressed companies would cease trading as soon as purchase was complete, but would be kept legally active for as long a period as possible before finally being liquidated. The ruse was to create enough distance between the liquidation and the previous directors that they would not be associated with the collapse.
The rogue firms charged fees according to the size of the debt their clients were in. If a company owed £500,000, they would charge £15,000 for their ‘services’.
Targeting struggling businesses
Atherton Corporate (UK) Ltd and Atherton Corporate Rescue Limited were found to have duped clients with various false and misleading claims about the legality of what they were doing. They and the five associated companies that acted as purchasers were wound up in the public interest for undermining the insolvency regime.
The case follows the recent similar story we covered of Save Consultants Ltd, which was shut down for providing insolvency services without a licence after advertising that it could find a buyer for distressed businesses in as little as 48 hours for a one-off fee.
These cases reflect a trend in unscrupulous operators targeting struggling businesses with ‘alternative’ insolvency and corporate rescue services, itself a sad symptom of the rising number of companies that find themselves in financial distress.
The advice to any company director or business owner that is faced with unmanageable debts or declining financial fortunes is always, always check the credentials of anyone you take insolvency advice from. All bona fide insolvency practitioners in the UK are accredited by the Insolvency Service to administer a carefully regulated set of insolvency procedures
designed to balance the interests of creditors with keeping businesses trading. The long and short of it is, the best options for coming out the other side of insolvency, whatever the final outcome might be, are contained in those authorised insolvency procedures.
As with many scams, a good rule of thumb to bear in mind is that if it sounds too good to be true, it probably is. With the Atherton cases, clients were being told they could pass on liability for debts by selling their business, but keep hold of assets they could use to keep trading; in some cases they were told they could continue using previous trading names even after they had been sold, and were advised to withhold information about the sale from Companies House so they could keep accessing their old company bank account. All of this is spurious and deeply suspect, and sounds it.
Any claims to offer ‘alternatives’ to formal insolvency procedures are also an obvious red flag. An ‘alternative’ to a legal procedure is probably illegal or at least unregulated and therefore highly risky.