Two film investment companies that took in ?3 million from the public but failed to provide any returns have been wound up in the High Court following an investigation by Company Investigations of the Insolvency Service.
On 31 August 2016 Mr Registrar Briggs ordered that Spice Factory (UK) Limited and Gummy Bear Films Limited be wound up in the public interest after hearing that the companies misled the public and spent, at most, 11% of funds received from the public on film production. The remainder of the money was divided between the brokers who recruited investors, the director Michael Cowan, his former business partner Steven Wilkinson and companies they controlled.
The court heard private individuals entered into investor agreements with Gummy Bear Films Limited after introductions by brokers. It was intended that these private investment funds would receive an equity profit in a film, Gummy Bear 3D The Movie, which has not been made.
The court heard that the funds received from investors were not ring fenced or safeguarded in any way and were either paid into Spice Factory?s current account, where they were treated as general income of the company, or via escrow accounts to various third parties.
Mr Cowan allowed Mr Wilkinson, who was at the time an undischarged bankrupt, to operate Spice Factory?s bank account without Mr Cowan, who was the company?s director, exercising any oversight or control. Mr Registrar Briggs noted that there was no doubt the companies should be wound up in the public interest. He was particularly concerned by the lack of commercial probity.
The public had been misled into making investments which they would not have made had they known the truth, which was that around 89% of their investment was not going to film production costs.
Registrar Briggs considered that the companies had failed to operate the business with transparency as a result of Mr Cowan?s delegation of financial control to Mr Wilkinson and further noted that the company?s failure to take steps to establish whether members of the public were ?high net worth individuals? or ?sophisticated investors?, represented a failure to protect the interests of those who entrusted them with their money.
David Hill, a Chief Investigator, Company Investigations said that:
The companies persuaded members of the public to part with substantial sums of money to invest in films. No films were produced and the money raised from the public in reality was used to benefit those running the companies.
As so often is the case, if an investment scheme appears to be too good to be true, it probably is.
The petitions were presented under s124A of the Insolvency Act 1986 on 29 June 2016. By virtue of the winding up orders made on 31 August 2016 the Official Receiver is liquidator of the companies.