Insolvency trade body R3 has welcomed moves by the Insolvency Service (IS) to close down eight companies which offered misleading information about the pre-pack administration process to companies in financial distress.
The latest companies to be wound up are the connected firms Chiltern Consulting Ltd, Chilcons and Source Finance Ltd, based in Buckinghamshire. The three firms sent over 4,000 unsolicited mailshots a month to businesses and directed recipients to Chiltern's website www.prepacks.co.uk.
The IS said both the letters and website contained inaccurate, misleading and incomplete information. Directors were given the impression that pre-pack administration was a closed process, that it was designed to benefit them rather than the company's creditors, that asset values would be kept low and that avoiding disqualification was simply a matter of giving the right answers to questions from IS investigators.
The IS said the marketing material also risked bringing the insolvency regime into disrepute by making generalised, unsubstantiated and disparaging remarks about the insolvency profession.
The latest development forms part of an ongoing IS operation looking at unregulated businesses offering insolvency advice and introducing potential clients to select groups of IPs. In the case of Chiltern, Chilcons and Source, the clients were not told that they would be referred to one of only three firms of IPs, or that those same IP firms each paid a substantial monthly retainer to the three companies.
So far, eight companies have been wound up including Adam Smith Business Development Ltd, Company Corporate Transfer Ltd, Genesys 2000 Ltd, The Recovery Partnership Ltd and TAG (Chesterfield) Ltd.
Graham Rumney, R3 chief executive, said: 'We applaud the Insolvency Service's efforts in this regard, and are keen to see them continued. R3 will continue to work with the Insolvency Service to guard against companies that undermine the UK's business rescue culture.'
Graham Horne, IS deputy chief executive, said: 'Trust is the cornerstone of business relationships and the eight companies we have shut down violated that trust by giving misleading and inaccurate information to financially vulnerable businesses.'