Domo Developments Ltd

The directors of an insolvent company appear to have gone rogue, causing significant issues for the Joint Administrators.

Domo Developments Ltd was incorporated in 2016 for the purposes of carrying out property investment and development activities.

It entered administration on 28 June 2022, after a payment due to the company was not received, causing the company to default on a payment to an individual loan provider, which in turn presented a winding up petition. As this represented a default under the terms of a mortgage provided to the company, the mortgagee took steps to protect its position by appointing Irvin Cohen, Gary Shankland and Jacob Beake of Begbies Traynor as Joint Administrators.

As outlined in their initial Proposals, the Joint Administrators initially anticipated that the company could be rescued as a going concern. This was based on information provided by the company’s directors that the company had invested over £7 million in a partnership trading as Black Capital UK, and that the directors had attributed a realisable value of £6.3 million to this investment.

In mid-September 2022, the Joint Administrators were made aware that Black Capital UK was placed in provisional liquidation, that there are a number of other creditors in addition to the company, and that Black Capital UK may have been operating as a Ponzi scheme.

These revelations led the Joint Administrators to conclude that the company is insolvent and not capable of being rescued as a going concern. As a result, they issued a statement of revised proposals setting out that they proposed to realise the company’s assets with a view to making a distribution to creditors.

Since that time, the company’s directors have caused a number of issues in the administration, including by:circulating a video update without the Joint Administrators’ authority to investors in which they urged investors to object to the approval of the revised proposals, despite having been notified that their powers as directors have ceased and that they do not have authority to communicate with creditors;failing to furnish the company’s books and records to the Joint Administrators;failing to comply with the Joint Administrators’ requests for information; andcirculating further video updates referring to a proposal they claim has been put forward to Joint Administrators for a CVA of the company, although this has not been done.

The Joint Administrators have serious concerns that certain investors may not have been made fully aware how the loans provided to the company were to be utilised and, despite being told that the funds invested in the company would remain safe and that they were investing in a property holding company, certain investor funds appear to have been paid to Black Capital UK, an unregulated investment fund, or used to fund other company expenses.

The Joint Administrators have been assisted by Eversheds Sutherland.

Their Progress Report can be found HERE.