APW Asset Management Ltd, a company which sold Australian wine to members of the public for investment and capital growth purposes, has been wound up by the High Court for making baseless claims about its investors’ potential returns.
The winding up petition was presented to the unscrupulous wine seller on 18 March 2015 following an Insolvency Service investigation. The company liquidation took place on 25 March 2015, with the official receiver appointed as liquidator.
A string of false claims
The Insolvency Service’s investigation found APW had made a string of false and misleading claims about the potential investment returns and how the wine sales would be handled.
The court also heard how the company had operated with a complete lack of transparency regarding the company’s ownership and control. So much so that none of the firm’s directors or employees were able to provide information about the identity or whereabouts of the company’s 95 percent majority shareholder. The Insolvency Service concluded that control of the company did not appear to have rested with the appointed directors.
APW’s company website stated that: “We proudly occupy the role of a ‘fiduciary’ in all our dealings, providing clients with a rare opportunity to obtain uncompromising and genuinely independent advice, free from conflicts of interest”.
However, through the course of its investigation, the Insolvency Service found things were not quite as the company had claimed. It uncovered information which revealed that:
- Since 2013, APW’s main source of income was generated by buying wine back from existing clients before reselling it to new investors, a process known as repack sales. By March 2014, repack sales accounted for 91.2 percent of APW’s income.
- The repack sales resulted in an average loss of 44.3 percent on the price the selling clients had originally paid for the wine.
- APW then resold the same bottles of Australian wine to new clients with an average mark-up of 81.3 percent.
- Of course, APW’s new clients were completely unaware that the wine they were buying had been purchased from previous customers at a sizeable loss.
- APW’s selling clients were led to believe the wine they were selling back to the company was being sold on the open market, and not to clients at a considerable profit to APW.
Unpaid remittances worth £600,000
Unfortunately, APW’s wanton disregard for its customers did not stop there. It further exploited investors by delaying or withholding payments they were due. This included the failure to pay more than £50,000 owed to the estate of a deceased client.
To explain the late or often nonexistent payments, APW claimed the delays were due to extended settlement terms or sales being made overseas, when in reality, the wine had been immediately sold to new clients who had made prompt payment to APW. Following the company’s liquidation, there was an estimated £600,000 of unpaid remittances owing to APW’s creditors.
Delays in issuing sales invoices and remittances to APW’s selling clients has caused confusion about which investor has legal title to the wine. However, a lot of investors have been left out of pocket, with 19,482 bottles of wine that should have been held at a bonded warehouse still unaccounted for.
APW’s viability relied on its clients’ losses
Welcoming the winding-up petition and the High Court’s decision to liquidate the company, Colin Cronin, the investigation supervisor, said: “APW used high pressure sales tactics which emphasised the growth potential of its wine. Yet the viability of APW, in the latter years at least, depended upon its clients suffering losses on wine they had bought for investment purposes.
“The company then cynically sold this same wine to new clients at a considerable profit for itself. This conduct is the very opposite of the fiduciary duty the company owed to its clients.
“These proceedings show that the Insolvency Service will take robust action against companies which operate against the public interest in this way.”
The directors of this company behaved badly in misleading customers. Directors must always be aware that when a company becomes insolvent they should not be taking further orders or sell goods they cannot deliver. Either activity will very likely increase the company’s debt situation and could lead to accusations of wrongful trading. Wrongful trading can leave directors being made personally liable for the increased company debt.
A director must seek professional insolvency advice immediately if the company is insolvent and makes the decision to continue to trade. For more information on this subject call 08000 746 757.