Leicestershire-based IFA Willow Financial Management has been forced into administration after facing £1.5m in Arch cru liabilities, with former directors setting up a new firm and claims likely to fall on the Financial Services Compensation Scheme.
Willow entered discussions with administrators in July after assessing its Arch cru sales and concluding it would be exposed to significant claims from investors, according to a recent statement of administrator’s proposals.
The firm was then bought in a TUPE arrangement by two separate firms set up by its former directors for a total of £40,000.
The statement of administrator’s proposals says that upon reviewing its files, Willow Financial found Arch cru had been marketed as low risk “and as such a significant number of claims were expected”.
It adds: “The potential financial burden to repay investors would leave the partnership exposed to significant current and future claims.”
Two parties, My Wealth Management – an associated company directed by Ian Morris, Philip Martin and Peter Holden – and Dynamic Wealth Limited, an associated company directed by Calum Cameron, made an offer for the firm of £40,000 for its goodwill and ongoing client remuneration, with each purchasing 50 per cent of the assets listed.
Morris was Willow’s financial director, Martin was its sales and HR director, Holden was its managing director and Cameron its chief executive.
The pre-packaged sale ensured the majority of the firm’s staff remained employed, the administrators say.
The administrators anticipate there will be sufficient funds to discharge preferential creditor claims in full.
The FSCS usually ranks as an unsecured creditor. The administrators say a dividend will be paid to unsecured creditors – but that this is dependent upon future realisations in respect of trail receipts and the level of claims.
Willow’s total liability to creditors stands at £1.59m, including the £1.5m Arch Cru compensation bill and a £23,040 bill to HMRC.