Legal services companies wound up after exposure
10 May 07
High Court orders liquidation of "scandalously run" businesses that misled agents
Two companies engaged in the provision of legal documents to members of the public in England & Wales have been put into compulsory liquidation after the High Court in London found they had been "scandalously run".
Following action by the Companies Investigation Branch (CIB) of the Insolvency Service, Nationwide Legal Services Ltd and NLS Sheffield Ltd, which recruited and trained agents to draw up documents such as wills, have been wound up.
Nationwide Legal Services Ltd advertised extensively on national radio and television in order to recruit agents who paid a licence fee of £6,950 to run their own businesses. NLS Sheffield Ltd provided legal training to the agents, who were then able to take instructions from members of the public for the drawing up of legal documents. NLS Sheffield Ltd also drew up legal documents on behalf of agents.
CIB's investigation found an extremely high rate of business failure among agents. Nationwide Legal Services Ltd had recruited some 2,000 agents of which only 200 were active during 2006, mainly those most recently recruited.
Serious misrepresentations were made to agents to get them to buy the business opportunity. In particular, agents were advised that they could expect to achieve earnings of £250,000 a year when, in reality, average earnings were £3,500.
Further concerns put before the court in respect of Nationwide Legal Services Ltd included the prominent management role played by a disqualified director; forged signatures on critical company documents, such as bank mandates and insurance proposals; and the diversion of company funds to a non-company account.
NLS Sheffield Ltd produced legal documents without supervision from qualified solicitors, creating a risk of negligence claims. In addition, there was serious doubt about the adequacy and validity of the company's public indemnity insurance.
The High Court held that the companies had been "scandalously run to the huge detriment of the public and the agents who have been gulled out of their money". The companies went into compulsory liquidation on 2 May.