At a meeting of creditors last week, KFM was placed into liquidation and a committee of three was formed to deal with the liquidation.
David Reid, a member of the committee who recently won a £190,000 court case against KFM for neglect of his occupational pension scheme, says the committee will be pressing for an explanation of the A2O deal.
He says: “We do not just want to look at the relationship with KFM and A20 but we also want to look at the deal and how £5m turnover could be sold for such a small sum. We want to know how it was valued and what happened to the income stream.”
In January, the majority of KFM’s 30 advisers novated to A20 in a deal that saw KFM receive £150,000.
At the same time, Malcolm Kilminster sold his own business to A2O for £265,000, with a further £50,000 to be paid after six months and 12 months. Under the terms of the deal, any residual inc- ome in KFM would pass to Kilminster’s own practice if KFM ceased trading.
At the time, shareholders in KFM expressed anger at the deal, believing it did not represent good value for the company. Some shareholders are currently investigating taking legal action against Malcolm Kilminster.
A letter sent to creditors last week by liquidator BN Jackson Norton, seen by Money Marketing, reveals A2O is one of the biggest KFM creditors, owed £127,423. The total currently owed is £725,197, although a number of creditors have yet to submit their amounts. Creditors include the FSA which is owed £28,000.
The letter also shows that KFM made a £1,414,150 loss between January 1, 2007 and July 16, 2008. This is compared with a profit of £1,198,199 and turnover of £5,275,660 for the year ended December 31, 2006.
The liquidator’s letter blames two compensation claims, understood to amount to around £300,000, for the company having to go into liquidation, as well as key advisers leaving and the increased burden of regulation.
A2O and Malcolm Kilminster were unavailable for comment.