The case concerned a businessman who subscribed for £200,000 worth of shares in a company that he saw advertised on a website seeking angel investors. Having previously met with two of the company's directors, he was impressed by their professed plans for growth and trading success. The impression of a business in good financial health and with a promising future was reinforced by slide deck presentations and financial modelling documents.
The directors said nothing to suggest that the company was insolvent or struggling financially, and also failed to mention that rent on the company’s premises was significantly overdue. Less than two years after the business man invested in the company it was voluntarily wound up and the investment was lost.
The business man brought proceedings against the directors of the Company. The Court found that the directors intentionally made false representations that induced him to make the investment. They were at the time aware that the company was insolvent, or bordering on insolvent. They knew that there was no justifiable basis for having any optimism at all as to the company's future prospects. Had the businessman been aware of the true position, the business man would not have made the investment.
The impression given to him as to the state of the company's finances was not over optimistic but deliberately false and misleading. The existence of significant debts was not disclosed to him, nor was he made aware that his money would be used not to expand the business but in part settlement of the company's debts, many of which were apparently owed to the directors themselves.
The businessman's claims of deceit and unlawful means conspiracy were upheld and the directors were ruled jointly and severally liable to return the entirety of his investment by way of damages.
If you have lost money as a result of a company insolvency or if you are facing claims arising from a company insolvency It is vital to seek expert legal advice as early as possible. Contact Leanne Schneider-Rose who specialises in all types of insolvency matter for further advice l.schneider-rose@sydneymitchell.co.uk or 0121 698 2200.
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