Rogue IVA provider shut down

16th May 2022

A rogue volume IVA provider has been wound-up by the Insolvency Service.

Vanguard Insolvency Practitioners (along with three connected companies: MDN Consultancy Limited, Newtco Limited and KIS Financial Consultancy Limited) were wound-up in the public interest at the High Court in Manchester before His Honour Judge Hodge.

Petitions were submitted to the court by the Insolvency Service, on behalf the Secretary of State for Business, Energy and Industrial Strategy. The Official Receiver has been appointed liquidator of the companies.

The court heard that Vanguard was a ‘volume’ Individual Voluntary Arrangement (IVA) provider that enabled people in debt to come to an arrangement with their creditors to pay all or part of their debts.

Vanguard charged customers a fee for facilitating their arrangements, which were supervised by Vanguard’s licensed insolvency practitioner.

Following complaints about Vanguard’s practices, however, the Insolvency Service launched confidential enquiries before investigators uncovered serial abuse of the payments made by Vanguard’s customers.

Vanguard traded from 2016 and used third-party suppliers to help administer the IVAs and realise debtors’ assets. By April 2020 Vanguard had more than 14,000 IVA cases under its management.

Investigators found that between August 2018 and June 2020, Vanguard made payments to various third-party suppliers totalling almost £9 million from their customers’ estates under the guise of expenses or disbursements.

Some of the third parties under a fee sharing arrangement would then make payments to MDN Consultancy and KIS Financial Consultancy, who were connected to Vanguard through close personal or family relationships.

Further enquiries discovered that Vanguard’s licensed insolvency practitioner, responsible for overseeing the IVAs, did not properly explain to customers what their fees were being used for.

Investigators concluded that Vanguard’s practices lacked transparency as did the activities of its licensed insolvency practitioner.

The winding up proceedings were initially defended by Vanguard and the connected companies. But before trial, the four companies confirmed they would not oppose the proceedings without making any admissions. At trial the Court was content to wind up the companies.

The Judge commented that it was of particular concern that the director of Vanguard seemed incapable of seeing anything wrong in the company’s failure to disclose to creditors and debtors the mechanism that was used to pay money from the IVA estates, effectively for the benefit of himself and his companies.

Claire Entwistle, Assistant Director of Investigation and Enforcement Services for the Insolvency Service, said “Following a complex and lengthy investigation, the court recognised the severity of Vanguard and the connected companies’ activities before closing them down for good.”

“This sends a strong message to volume IVA providers that if they do not deal with their cases properly and there is evidence of abuse, we will take strong action to protect customers and stop them.”

“The winding up petitions have not affected the position of any of the IVAs previously under Vanguard’s control. These were taken on by another provider some time ago and consumers should continue to make payments in accordance with the terms of their agreement.”

The government recently consulted on making changes to the insolvency practitioner regulatory regime, including whether firms offering insolvency services should be subject to regulation.