Castlestone administrator prepares to sell off assets

The administrator of liquidated fund group Castlestone Management (CML) has said it is "very unlikely" it can rescue the company in its current form based on its assets and liabilities.

Antony Batty & Co is instead to sell off the company’s assets in a more orderly way than via a liquidation, or to realise property in order to pay off creditors.

CML's directors had hoped the company could remain solvent following adminstration as they thought its assets would exceed its liabilities.

However, based on the financial information Antony Batty & Co has since received, it said it "considers this to be very unlikely".

Based on current information, it expects there will be sufficient funds to make distributions to creditors.

Last month former CEO Angus Murray told Investment Week none of the costs of wind-up of the firm would be borne by investors, who would see their capital returned based on the final NAV of the funds as of 11 August, 2011.

He added there is no link between the closure of Castlestone Management Limited and the UCITS funds, which were completely separate.

According to the administrator's statement, several assets including modern artworks had been removed from the office prior to the FSA raid by Castlestone Inc, which claimed prior ownership of them.

In July Castlestone Management denied any artworks belonging to its Collection of Modern Art fund had been removed from the building.

For the year ending 30 June 2010, Castlestone Management had assets of £602,069 and made a net profit after tax of £248,571.

The group’s assets as of October included £75,000 owed to CML by Castlestone EU, and £5,000 worth of furniture and equipment, the administrator said.

Liabilities included £1.2m owed to various unsecured creditors, including HMRC, to which the firm owed £389,417.

Other creditors included the Collection of Modern Art, to which the group owed £13,389, as well as Cofunds and Friends Provident International.

The adminstrator also said it must submit a report to the Department for Business, Innovation and Skills concerning the conduct of Castlestone's directors for the three years prior to the wind-up of the business.

It added this is a standard part of the duties of an adminstrator and does not imply criticism of the directors.

Among the directors were Murray (pictured) and former director of global sales, Jerry Devlin. Murray stepped down from the CEO role in August to become CIO based in the British Virgin Islands, handing the reins to Devlin.

Antony Batty & Co will also "investigate the affairs of the company in general to consider whether any civil proceedings should be taken on its behalf".

The administrator confirmed the FSA issued an enforcement notice on the group in April 2011 due to “an alleged lack of corporate governance”, and then in July it searched the group’s office, seizing documents and computer equipment.

“This inevitably led to a serious disruption of the business. A number of employees resigned around this time,” the administrator said.

“Around July, the independent directors of Castlestone EU took the decision to wind down the UCITS fund due to the FSA enforcement action, a loss of confidence in CML and the realisation the UCITS funds were never going to reach critical mass, potentially disadvantaging investors. 

“As a result, CML lost one of its two revenue streams, leading to the redundancies of 24 people.”

On 30 September, with no alternative sources of business and the FSA continuing its investigation, the firm’s directors decided to cease trading and call in the administrators.