The Telegraph reports that investors in Harewood Associates have been told by the administrators, Begbies Traynor, to expect at least 84% losses, with a possibility of total loss.
A spokesman for Begbies Traynor, the administrators, said: “The proposals issued to creditors anticipate a range of returns between nil and 16p in the pound. The return is subject to realisations of debts due from associated companies.”
With the amount left in these associated companies unknown, the standard rule for investors in collapsed unregulated investment applies; expect nothing and treat any recovery as a bonus.
Begbies Traynor are due to deliver their initial report to Harewood’s creditors within the next few weeks.
While investors in Harewood’s loan notes are counted as creditors, other Harewood investors, who invested in shares in Harewood companies (SPVs or Special Purpose Vehicles) are currently in limbo.
In general, a shareholder of a company (including an SPV) can only realise their investment by either selling it to someone else or winding up the company. The former evidently isn’t going to happen.
Unlike creditors, shareholders have no power to call in administrators in that capacity. If they can get a controlling share together, they can wind the company up, but Harewood investors invested in preference shares with no voting rights, which appears to remove that option as well.
Harewood Associates illegally promoted its loan notes and SPV shares directly to investors. In 2016 it falsely represented on its website that its loan notes and SPV shares were exempt from UK securities law as they were property-related.
The reality is that while the sale of a property is not subject to UK securities law (even if it is sold as an investment), a loan note or equity security most definitely is. The fact that it is a share in / loan to a property company is irrelevant.
Soliciting investment in securities in the UK requires authorisation from the Financial Conduct Authority, which Harewood did not have.