Dodgy Alternative Investment Companies Shut Down by High Court

28/11/2016


There is nothing wrong with capitalism, but it is an essential role of government to ensure that companies do not operate against the public interest. In one case that proved the point, the High Court compulsorily wound up two companies that had missold objectionable investments to the public.

The companies were alleged to have used misleading marketing material to sell investments in carbon credits, rare earth metals, coloured diamonds and precious metals to the general public. They were also said to have charged excessive commissions and, in the circumstances, the Secretary of State for Business, Innovation and Skills petitioned the Court under the Insolvency Act 1986.

The companies denied that they lacked commercial probity and argued that they had cooperated with the investigation in a transparent and forthright manner. They had ceased trading in coloured diamonds, carbon credits and rare earth metals when they became aware that such products were unsuitable as retail investments.

In upholding the petition, however, the Court found that investors had been seriously misled and that the companies’ practices had fallen below the accepted minimum standard of commercial behaviour. Precious metals, in particular, had been missold in a manner that could only have been deliberate. The companies were in any event insolvent and allowing them to continue to trade would expose members of the public to the risk of suffering further loss.


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