Starting from today, four directors have been disqualified from acting as company directors for a total of 22 years following an Insolvency Service investigation into their locksmith and plumbing franchise group which consisted of Key Edge Limited, Key Edge Plumbing Limited and Key Edge Group Limited.
The companies’ operations were characterised by exaggerated claims of the benefits for potential franchisees and a lack of clarity about their business operations.
Julian Lloyd Bennellick of Exeter, Christopher Davison also of Exeter, Jeremy Charles Darvill of Tiverton and James Savage of Cullomton Devon each signed Company Director Disqualification Undertakings banning them from managing, controlling or being directors of any company. Their undertakings acknowledged they had caused or allowed the companies to operate a disreputable business that was seriously lacking in commercial probity and contrary to the public interest.
Commenting on the case, Chris Mayhew of Company Investigations for The Insolvency Service said;
"The disqualification periods secured in this case should offer the public reassurance. The Service will not tolerate dishonest or reckless directors. We have strong enforcement powers and where we find serious failings, such as the misrepresentations made to induce investment in the Key Edge franchise, we will use those powers to remove the directors from the business environment, as these directors discovered".
In addition to the high number of un-dealt with complaints to the companies by franchisees (50% of locksmith, 35% of plumbing) the investigation found the directors had failed to maintain adequate company records. In summary the Service’s investigation established that:-
· there had been deliberate non-disclosure and misrepresentations made to prospective franchisees with exaggerated claims of non-existent national accounts. “Guaranteed work”, financial forecasts, potential earnings, discounts on supplies and protected territories for the sole purpose of encouraging them to sign up and pay the requisite fees;
· the businesses were unsustainable and relied on fresh franchise fees for operating capital;
· when an application to the Small Firms Loan Guarantee Scheme was made to obtain a loan of £150,000 misleading information was provided relating to the purpose of the loan and the success of the business. The loan was granted and upon receipt £46,351 was immediately paid to the directors;
· there had been a failure to disclose Mr Darvill’s indebtedness to Key Edge Limited in the sum of £76,508 as at 31 January 2006, or evidence or explanation as to how he afterwards came to be a purported creditor of the company for £30,000;
· Key Edge Limited’s credit card account was used for cash withdrawals and personal expenditure, in particular £38,145 by Mr Bennellick;
· Key Edge Plumbing Limited’s accounts falsely claimed that it was a dormant company in the period 18 September 2003 to 30 September 2004 notwithstanding that Mr Bennellick and Mr Darvill had borrowed money from the company of £77,759 and £30,221 respectively.
Mr Bennellick and Mr Davison both signed undertakings on 17 August 2010 not to be directors for a total of six years each. Mr Darvill gave an undertaking on 26 July 2010 not to be a director for five years and Mr Savage gave an undertaking on 12 August 2010 not to be a director for five years. Their undertakings have all been accepted and the periods of disqualification commence on 22 September 2010.
Members of the public who think they know of a person who is acting in breach of a Directors Disqualification Order or Undertaking can report them to The Insolvency Service Enforcement Hotline on 0845 601 3546.
Notes to editors
1 Key Edge Limited, Key Edge Plumbing Limited and Key Edge Group Limited were each ordered into liquidation on grounds of public interest on 21 June 2007. See news release “£2.7 million franchise group shut down” issued on 22 November 2007.
2 Disqualification undertakings were introduced in April 2001, they are an administrative equivalent of a disqualification order but do not involve court proceedings. Without specific permission of a court, a person with a Company Directors Disqualification, including Undertakings, cannot:-
act as a director of a company; take part, directly or indirectly, in the promotion, formation or management of a company; be a liquidator or administrator of a company; or be a receiver or manager of a company’s property.
Further information on director disqualifications and restrictions can be found at http://www.insolvency.gov.uk/directordisqualificationandrestrictions/whatisdisqualification.htm
3 The Insolvency Service administers the insolvency regime, investigating all compulsory liquidations and individual insolvencies (bankruptcies) through the Official Receiver to establish why they became insolvent. The Service also authorises and regulates the insolvency profession; deals with disqualification of directors in corporate failures; assesses and pays statutory entitlement to redundancy payments when an employer cannot or will not pay employees; provides banking and investment services for bankruptcy and liquidation estate funds; and advises ministers and other government departments on insolvency law and practice. Further information about the work of The Insolvency Service is available from http://www.insolvency.gov.uk
4 To report a director acting in breach of a disqualification contact The Insolvency Service on 0845 601 3546 or by email to email@example.com or by post at Insolvency Service - Hotline Team, 3rd Floor, Cannon House, 18 Priory Queensway, Birmingham B4 6BS. A disqualified director search can be carried out at http://www.insolvency.gov.uk/doitonline/ddbase.htm
5 Media enquiries and requests for further case studies should be directed to: -
Denise Rawls, Press Office Manager 020 7674 6910
Ade Daramy, Press Officer 020 7596 6187
Phone: For enquiries please contact the issuing dept