Thousands of shareholders in a recycling company have lost out after a High Court judge ordered it to be shut down when it was exposed as a sham.
Magna Group plc and three other related companies was ordered to be closed in the public interest following an investigation by the Companies Investigation Branch (CIB) of the Insolvency Service.
The group claimed to be capable of making massive profits from the extraction of Polyvinylbutyral (PVB) from recycled glass sourced from vehicle windscreens, and sold shares in the company through a cold-call sales scheme.
Potential investors were tempted with the lure of big cash returns following a sales pitch that boasted about the profitable niche in recycling glass from car windscreens.
Run by 66-year-old Ronald Lewis of Solihull, West Midlands, the four firms to shut down at the High Court hearing were Magna Group PLC, Magna Engineering, Magna Recycling and Magna Toughened Glass.
Investigators discovered the group’s recycling plant near Selby in North Yorkshire failed to generate anything other than peripheral orders, mainly for recycled glass as a by-product.
The group's sales totalled less than £40,000 over three years, despite shareholders being told to expect the group would be generating turnover in the tens of millions of pounds within two years of starting operations.
Other claims made to shareholders concerned the existence of imminent orders that never materialised, expansion plans that did not come to fruition and the value of the business, which included one valuation of £150 million that proved to be totally unfounded.
According to the Insolvency Service the group was heavily insolvent, with estimated creditors in excess of £1.1 million at the date of winding up.
A spokesman said in a statement: “Magna plc failed to comply with Financial Services Authority (FSA) regulations governing the sale of investments. Due to the failure of the company to keep proper records, it was unable to provide an accurate account of how many shareholders it has.
“CIB estimated that it had received up to £2.3 million from purchasers of preference shares, of which over 40 percent of that sum was paid over to a third party share-selling agent employed by the company.”
Since re-registering Magna plc as a plc, the company only had one recorded director, in contravention of Companies Act requirements for a minimum of two directors to be in post in a public limited company.
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