English Liquidators of a fraudulent investment company were able to navigate a complex web of defunct companies and trusts to realise assets in a Jersey company.
The partners of Arck LLP (in Liquidation), registered in England ("Arck"), an investment firm, were convicted of fraud and forgery. Richard Clay, thought to be the driving force of the scandal, is now serving a 10 years 10 months prison sentence and his deputy Kathryn Clark received a two year suspended sentence.
Arck's investors were falsely promised substantial returns on funds invested into offshore tourism real estate located in the Cape Verde islands, via Jersey based companies. They were instead swindled of their money with much of the funds used for alternative purposes.
Arck's Liquidation was overseen by English Liquidators. Upon their review in to Arck's activities, they discovered a complex web of companies and trusts preventing a straightforward Liquidation. Furthermore, many of the companies through which money had been funnelled had now been dissolved (for failing to file statutory returns) and were inaccessible to the Liquidators.
The Liquidators believed one of these dissolved companies, Arck Estrella Limited, registered in Jersey ("Estrella"), held the assets of the group structure. In order to realise any assets, the Liquidators applied to the court to restore Estrella and appoint Liquidators to wind up the company on grounds that it would be just and equitable to do so (Art 155(1)(a) Companies (Jersey) Law 1991).
Jersey's law permits only a company's shareholders or directors to appoint a Liquidator. The current shareholders of Estrella were however a group of dissolved companies or obsolete trusts. The Liquidators would therefore have to appoint themselves as shareholders of Estrella.
An investigation into Estrella by Jersey's regulator found incomplete record keeping, managed by the now defunct Herald Trust group, and the possible beginnings of a trust that would favour Arck LLP, created by the fraudsters.
In finalising the matter, the Court eventually recognised the existence of Arck as beneficiary of such trust for 5% shares following the evidence of emails and unexecuted trust instruments. On the Saunders v Vautier basis, Arck's Liquidators would therefore receive title of the shares held on trust. However, Estrella's lack of corporate systems, processes and any governance meant the shareholder register for Estrella could not be updated to reflect the Liquidators' share ownership, once again preventing the appointment of the proposed Liquidators.
The Liquidators therefore made an application to the Court under Art 47 of the Companies (Jersey) Law 1991 for the Court to rectify Estrella's share register. The Court duly rectified the share register to recognise Arck as a legal shareholder of Estrella, giving the Liquidators much needed standing.
As shareholders, Arck's Liquidators then appointed Jersey Liquidators from KPMG over Estrella, enabling them to realise any assets within Jersey's jurisdiction.