This
letter was sent to Denham Eke and David Gibson, then non-executive directors of
Rivington Street Holdings, from Suzanne Collins, in her capacity (at that time)
as a regulator at the Isle of Man Insurance and Pensions Authority.
Pathway One Plc
Background
On
19March 2012 I was emailed a copy of a complaint received at the T1ps
Investment Management Limited (‘TIM UK’) office from the Financial Ombudsman
Service (‘FOS’). This complaint was on
behalf of Mr R Forster, an investor in the T1ps Smaller Companies EIS Fund.
The
basis of his complaint was that he had requested an EIS 3 tax certificate for
one investment – Commercial Tyre Solutions/Pathway One – which had been
outstanding since October 2010.
As
he stated it was a requirement of the fund that the fund managers only invest
in EIS qualifying businesses who will supply a tax certificate.
TW
produced a response to the FOS on behalf of T1ps Investment Management (IoM)
Limited (‘TIM IoM’) (attached as Appendix 1).
This
response set out the following as the chain of events:
1.
On
2 July 2010, the t1ps Smaller Companies EIS Growth Fund (the ‘Fund’), through
WCS Nominees Limited (the Nominee for the Fund), made an investment into
Commercial Tyre Solutions Limited (‘CTS’).
CTS never actually issued shares to WCS Nominees Limited and as a result
the investment was treated as an unsecured loan.
2.
The
assets and liabilities of CTS were acquired by Pathway One plc (‘Pathway’),
prior to CTS entering administration. As a result of this the loan became
payable by Pathway and was subsequently converted into shares in Pathway. Unfortunately, this process resulted in the
disqualification of the subscription for the purposes of EIS tax relief.
3.
The
Directors of Pathway advised that they were discussing the pending EIS
application with HMRC. When the delay became unacceptable, the Fund
Administrator undertook an investigation and discovered that no application had
been made to HMRC.
4.
The
Fund Administrator was on the point of issuing a letter with text provided by
t1ps (IoM) to advise investors of the loss of EIS reliefs on their CTS/Pathway
investment when we received your letter.
5.
All
of the shares issued to WCS Nominees Limited for the Fund in Pathway to be
acquired at the original subscription price purchased. This will negate any potential loss incurred
by investors in the Fund.
6.
The
investors will be offered the choice of having their monies re-invested into an
alternative EIS qualifying investment within 90 days of the purchase of the
Pathway shares or to have their monies returned to them by the end of May 2012.
7.
The
Investment Management Agreement for The t1ps Smaller Companies EIS Fund was
novated by the former Manager, t1ps Investment Management Limited, to t1ps
(IoM) with effect from 1st October 2010. This change was notified to investors via the
regular Newsletter.
Whilst this did leave
a number of questions unanswered, it did provide a reasonable if superficial
response to the FOS, and supported a request to have the complaint considered
outside the scope of the FOS due to the novation of the management to the Isle
of Man.
The letter and
supporting all investors letter (copy as appendix 2) was sent to the FOS on 26
March.
One of the obvious
questions resulting from this letter was who would be buying the shares back
and refunding the monies to the fund. I
then became aware that the potential liability of this buy back was £100k, plus
the refund of any tax liabilities arising out the failure to obtain the tax
certificate in a timely manner. I also
became aware, through a document on a file, that Russell Darvill, of RSH London
office, was a director and company secretary of Pathway, and that the company
operated out of the London office.
In an attempt to
discover more about Pathway I sent an email to TW (attached as Appendix 3)
asking for more information. I have had
no response to that email.
I also became aware
at this time that Russell Darvill had requested the accountant to make
provision within TIM (IoM) accounts for £100k to fund the buyback. This has since been moved back into the UK
company and no provision is currently held within TIM (IoM).
On Monday 26 March –
I sent a chaser to TW asking for the information on Pathway with additional
information on CTS (Appendix 4).
Having no response to
my requests for information I undertook some investigation into Pathway and
CTS.
Pathway
One Plc
1.
Co
No 04311137 – UK – Incorporated on 25/10/2001.
2. 2. The
company had been formally dormant a couple of times then appeared to commence
trading in 2005/2006. At this time it appears to have been operated by Ian
Leith and Robert McDonald Watson. It
seems to have been a software company – it has an entry in Bloomberg which
describes how Pathway One Plc together with its subsidiaries (?), provides a
range of information technology products and services based around a suite of
tools for teachers. At this time it was showing a contact address in Leeds.IL
was terminated as a director on 17/09/2009 and RMW on 20/11/2008.
3. 3. The
Bloomberg article also states that as of 17 November 2008 Pathway has operated
as a subsidiary of Rivington Street Holdings Limited.Other articles on the
internet also describe it as a RSH subsidiary.
At present I have not ascertained whether this was the date RSH became
involved or not.
4. 4. Russell
Darvill became a Director and Company Secretary on 17/11/2009.Paul Rewrie became
a director on 15/09/2010. These are
currently the only directors shown.
5. 5. The
Annual Returns have been filed up to date.
A list of the members is attached (Appendix 5). Richard Henstock who shows a shareholding was
a director until 7 November 2008. It is
not clear from this listing why RSH should be the ultimate parent.
6. 6. The
accounts have been filed up to date – the last filing was to December 2010. The next filing is due by June 2012.(Appendix
6)
Note 15 to the
accounts talks about a ‘loan’ of £100k to CTS ‘a company of which Mr P E Rewrie
is a director’. It then goes on to state
that CTS went into administration in June 2011 and that £40k of the loan has
been written off. It is unclear whether
this is a separate loan to that granted by the fund or the same one taken over
by Pathway. There is no mention of
Pathway having bought the assets and liabilities of CTS as stated by TW in the
FOS response.
7. The Auditors resigned 13/01/2011, no new appointment has been
filed at Companies House.
Commercial Tyre
Services
1.
TW
forwarded to me his research in respect of CTS (Appendix 6 & 7).
2.
Paul
Rewrie was appointed as a director on 26 October 2009.
3.
CTS
went into liquidation in May 2010.
4.
According
to the Liquidator’s statement of receipts neither Pathway nor the fund are
listed as creditors.
As
you can see there are significant inconsistencies in the liquidation date and I
can see no reason why the fund should make an investment into a company which
had already appointed a liquidator – or why Paul Rewrie should be promoting it
at that time.
It
is not clear when or what Pathway took over when they assumed or bought all of
CTS assets and liabilities – if they did.
It
is not clear if there is one loan to CTS from the fund or one from the fund and
another from Pathway. The Auditors have
signed off that there is one for Pathway that has been 40% written off, so that
does seem to exist but it is not clear whether this dates from before or after
the liquidation or explain why they are not listed within the creditors of CTS.
The
appointment of Paul Rewrie appears unusual given his link to CTS and the loss
of monies in that venture.
I
cannot explain the relationship to RSH given the shareholding held – especially
as it was originally lower than it is now, however, publicity has been given to
the ultimate parent being RSH for some time.
If
this company is a subsidiary of the group has it been included for
consolidation purposes?
Recommendation
I
recommend that a formal investigation is carried out into the actions of
Pathway, and the investment of the fund into CTS. I cannot find a reasonable explanation for
the investment of the fund at the time it was made or for Pathway purchasing
anything from CTS or lending them monies.
Despite
requests I have been unable to obtain any explanation into the use of Pathway
from TW.
Suzanne Collins
29 March 2012
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