Mr John Mahon, the director of a land banking company based in Warrington, Cheshire which, with a connected company, was wound up in the public interest in 2012 - has been disqualified from being a director for eight years for failing to make himself aware of the companys business or keep proper books and records.
Mr Mahons disqualification follows an investigation by the Insolvency Service.
Mr Mahon, aged 35, who was a director of CLS & Partners Limited (CLS) has given an undertaking to the Secretary of State for Business Innovation and Skills (BIS) agreeing not to manage or in any way control a company or act as a director from 11 July 2013 for the duration of the disqualification.
The investigation found that CLS operated a land banking business selling small plots of land for investment. Land Banking is a practice where a landowner divides its land into small plots, which are then sold to investors on the basis of representations made that large returns will be received if the land is re-zoned for potential development or planning permission is obtained.
The company was wound up by the Court on grounds of public interest on 9 May 2012 following an investigation by the Insolvency Service authorised by the Secretary of State for Business Innovation and Skills.
Evidence provided by the Insolvency Service in the winding up of CLS had shown the company had sold agricultural land to would-be investors on the pretext that this was suitable for development. And, that the land had potential for development and that the company or another party would apply for planning permission. There reality was that permission would never have been given for these purposes.
In giving the undertaking for his role in the company, Mr Mahon did not dispute that he allowed CLS to trade in a manner lacking commercial probity, failed to inform himself of the trade of CLS and failed to maintain or preserve proper accounting records.
The investigation showed that:
- CLS sold plots of land at sites in Wakefield and Studley and between 29 March 2010 and 15 May 2011 sale agents acting on behalf of the company sold 78 plots for a total of 952,209.
- Mr Mahon failed to monitor or take an interest in the information provided to prospective investors and as a result misleading and unfounded statements were made.
- Investors who purchased plots at the Wakefield site were made to understand that CLS or another party acting on its behalf would apply for planning permission. No applications were made and it is unlikely that a change of use would be allowed given that the site was greenbelt land.
Investors who purchased plots at the Studley site were provided with information which implied that the land had potential for planning permission to be obtained for a housing development. The local council has stated that the likelihood of planning permission being granted was remote given that the land is in the greenbelt.
- The Official Receiver is unable to verify the purpose of payments totalling 541,281 and the liquidator has been unable to trace motor vehicles purchased for 113,689.
Commenting on the disqualification, Ken Beasley, Official Receiver at the Insolvency Services Public Interest Unit, said:
Mr Mahon allowed the company to mislead members of the public into purchasing plots of land for significant amounts of money based on the unfounded assertion that the plots had potential for planning permission. In failing to monitor or take an interest in the information provided to investors, Mr Mahon failed to discharge his responsibilities as a director of the company.
The Insolvency Service will take tough action to put a stop to companies trading against the public interest and we will seek to remove culpable directors from the business environment.