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Franchise Disqualification

by msecadm4921

Four directors have been disqualified from acting as company directors for a total of 22 years following an Insolvency Service investigation into their locksmith and plumbing franchise group which consisted of Key Edge Limited, Key Edge Plumbing Limited and Key Edge Group Limited.

The companies’ operations were characterised by exaggerated claims of the benefits for potential franchisees and a lack of clarity about their business operations.

Julian Lloyd Bennellick of Exeter, Christopher Davison also of Exeter, Jeremy Charles Darvill of Tiverton and James Savage of Cullomton Devon each signed Company Director Disqualification Undertakings banning them from managing, controlling or being directors of any company. Their undertakings acknowledged they had caused or allowed the companies to operate a disreputable business that was seriously lacking in commercial probity and contrary to the public interest.

Commenting on the case

Chris Mayhew of Company Investigations for The Insolvency Service said: "The disqualification periods secured in this case should offer the public reassurance. The Service will not tolerate dishonest or reckless directors. We have strong enforcement powers and where we find serious failings, such as the misrepresentations made to induce investment in the Key Edge franchise, we will use those powers to remove the directors from the business environment, as these directors discovered."

In addition to the high number of un-dealt with complaints to the companies by franchisees (50 per cent of locksmith, 35pc of plumbing) the investigation found the directors had failed to maintain adequate company records. In summary the Service’s investigation established that:

· there had been deliberate non-disclosure and misrepresentations made to prospective franchisees with exaggerated claims of non-existent national accounts. “Guaranteed work”, financial forecasts, potential earnings, discounts on supplies and protected territories for the sole purpose of encouraging them to sign up and pay the requisite fees;

· the businesses were unsustainable and relied on fresh franchise fees for operating capital;

· when an application to the Small Firms Loan Guarantee Scheme was made to obtain a loan of £150,000 misleading information was provided relating to the purpose of the loan and the success of the business. The loan was granted and upon receipt £46,351 was immediately paid to the directors;

· there had been a failure to disclose Mr Darvill’s indebtedness to Key Edge Limited in the sum of £76,508 as at 31 January 2006, or evidence or explanation as to how he afterwards came to be a purported creditor of the company for £30,000;

· Key Edge Limited’s credit card account was used for cash withdrawals and personal expenditure, in particular £38,145 by Mr Bennellick;

· Key Edge Plumbing Limited’s accounts falsely claimed that it was a dormant company in the period 18 September 2003 to 30 September 2004 notwithstanding that Mr Bennellick and Mr Darvill had borrowed money from the company of £77,759 and £30,221 respectively.

Mr Bennellick and Mr Davison both signed undertakings on 17 August 2010 not to be directors for a total of six years each. Mr Darvill gave an undertaking on 26 July 2010 not to be a director for five years and Mr Savage gave an undertaking on 12 August 2010 not to be a director for five years. Their undertakings have all been accepted and the periods of disqualification commence on 22 September 2010.

Members of the public who think they know of a person who is acting in breach of a Directors Disqualification Order or Undertaking can report them to The Insolvency Service Enforcement Hotline on 0845 601 3546.

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