The report indicates that the directors were criminally negligent with their client’s investments, especially as it is highly likely that clients sold other investments/savings in order to buy wines that they were not allocated or in some cases not immediately bought. I use ‘criminally negligent’ is a broad not legal sense here. The directors promoted Vinance plc as an investment company able to offer its clients’ good returns on their wine purchased from them. Yet they cared so little about their investors’ financial health that they failed to put in place proper records.
The investors were treated with scandalous disregard: it is high likely that although creditors will get some money back from the substantial stock of wine held by Vinance their retirement will be less comfortable than they hoped.
From the report: ‘We have asked the directors to prepare a summary of the company's estimated financial position as at 16 November 2012, which is known as a statement of affairs, but they have not yet prepared it. We understand that the reason for the delay is that there is too much uncertainty about the company's financial position and in particular the wine for which clients have paid.’
‘It was apparent that the company's records were inadequate and that the position of each individual client was not recorded properly. The directors could not easily work out which clients were short of wine they had ordered and paid for or what the extent of the shortfall was. The clients themselves were unaware that there was any problem, although many of them thought (and stated) that the company's systems left something to be desired.’
‘The situation became very serious and the directors lent money to the company to keep it afloat as they believed in its viability going forward. Ultimately, pressure from clients and HM Revenue & Customs forced the company to a crisis.'
The only audited accounts (to June 2010) for Vinance plc showed that the company managed to make a loss of £3.43 million on a turnover of £4.77 million. Given that the directors did not know the true financial position of the company, one has to wonder whether Vinance plc traded as insolvent for some time before it went into administration on 16th November 2012.
In late November Herron Fisher sold Vinance’s customer list sold for £30,000 + Vat to Albany Vintners Ltd/Arc Reserves Ltd. Herron Fisher were contacted by 24 interested parties and received four bids. See post here.
It won’t be known what dividend will be payable to creditors until Herron Fisher have managed to sort out the mess and have then been able to sell Vinance’s wine stock.
It is unclear whether Morgan Aston Ford Ltd, the previous incarnation of Vinance plc, kept adequate records. As Vinance plc would have inherited MAF’s records it would seem reasonable to think that they may well also have been inadequate and incomplete.