Investors in the collapsed Louis Group in the island are being asked to accept a compromise arrangement in a bid to get some of their money back.
Investors are being urged to agree to give up their claims in return for shares in an ‘untainted’ new company set up to receive the majority of assets that the liquidators manage to recover.
Louis Group entities in the island were wound up by the High Court last year after an island-based fund promoted as ‘low risk’ was suspended, unable to pay its multi-million pounds debts.
The liquidators’ investigation concluded there is a ‘taint of illegality’ across the vast majority of the business carried out by the group in the Isle of Man. There was a complex web of 120 separate Louis Group companies operating here.
Liquidators estimate there were over 700 different investors who invested a total of about £25m in the Louis Group Structured Fund and around £35m across various property syndicates.
Around a quarter of these investors are from the Isle of Man, the remainder mainly being from South Africa and the UK. The largest investor put in around £5m, but the vast majority invested much smaller sums - between £10,000 and £30,000. Many were attracted by the Louis family’s self-projected religious values and representations of low risk investment.
In a letter to shareholders in the Louis Group Structured Fund, the liquidators BVI explain how the diversion of assets to a British Virgin Islands company suspected of unlicensed deposit taking, together with deficient and ‘potentially false’ accounting records present a ‘substantial impediment’ to recovering money.
The liquidators have received more than 130 claims against the BVI entity LG SP Investments Ltd totalling in excess of £80m claims by value, 22 of which are from property investment claimants totalling circa £2.5m by value.
They note: ‘LGSF is not alone in suffering these problems. A number of other Louis Group companies have seen their assets diverted into LGSPI in ways which substantially deviate from representations made in other offering documents.’
The liquidators say the best option is for affected investors to agree to a compromise involving a new untainted company which would receive the majority of the assets they have managed to liquidate so far.
But before they can do that, investors would have to agree to give up whatever claims they might have in return for shares in the new company.
Investors in another Louis Group entity, LG SLN Ltd, are also being invited to accept a compromise arrangement involving them dropping their claim against LG SPI.