A Brighton-based film production company has been wound up by the High Court after misappropriating more than £3million of private investors’ funds.
Warlord Productions Ltd, a company which claimed to act as a co-producer of a film version of three Shakespeare plays, has been embroiled in a tragedy of its own, after failing to record, manage or account for funds received from private investors.
A confidential investigation by Company Investigations, part of the Insolvency Service, has found sufficient grounds to close the company. The winding-up petition was presented under s124 of the Insolvency Act 1986 on 11 May 2015, and the subsequent winding-up order was made on 1 July 2015.
No accountability for company expenditure
The Insolvency Service’s investigation found that Warlord Productions Ltd had received close to £6million in funds from members of the public. However, after paying commission to third party broker firms of £3million, the investigation was unable to determine the purpose or the whereabouts of the remaining £3million.
Michael Cowan, the film production company’s former sole director, claimed the funds had been used to pay the production costs of the film, but he was unable to provide the investigators with adequate records or a satisfactory explanation when asked to do so.
Not only were there no adequate records to account for the company’s expenditure of the funds, but the latest financial statements prepared for the company also showed that Warlord was balance sheet insolvent as of 31 January 2014.
No-one to protect the investors’ position
As a result of the company’s failure to maintain accurate records of the funds it had received, the investigation was unable to identify the investors who paid the company in excess of £3million in funds. This complete lack of accounting records would have made it extremely difficult for the company to make payments to the investors once the film was finished and generating a profit.
Warlord Productions Ltd also made misleading and unsubstantiated claims to investors regarding a number of well-known actors who it claimed had agreed to appear in the film. It also did not own the rights to the film, and the responsibility for filming the production had been passed to another company.
Throughout the investigation, the progress of the Company Investigation’s team was not only hampered by the dearth of financial records, but also by Mr Cowan’s assertions that he was the director of the company ‘in name only’, and that responsibility for the management of Warlord Productions lay elsewhere.
As a result of the seeming lack of company management, when Mr Cowan resigned from his position as director on 16 January, the company was left ‘abandoned’, with no-one left in office to protect the investors’ position.
A film company in name only
Welcoming the High Court’s decision to wind-up Warlord Productions, chief investigator David Hill, said: “This company appeared to be a film production company in name only as it seemed to do little or no ‘filming’ or ‘producing’.
“The Insolvency Service will investigate companies that are acting against the public interest and put them out of circulation.”
Warlord Productions Limited was incorporated as a private company on 29 January 2013, with Michael Cowan registered as its 100 percent shareholder and sole director. The winding-up order was made on 1 July 2015.
Companies must keep accurate records of all transactions undertaken and directors often overlook this important fact which can lead to serious issues if the worst happens. There are measures you can take if you are behind in record keeping but insolvent, so if you need advice on what to do call 0800 074 67575.
Written by: Mike Smith