Liquidator winds down stockbroker Bloxham’s over €5m accounting error
LAWYERS acting for the firm's partners, which last week was ordered to cease trading by the Central Bank after it was revealed the company was undercapitalised, applied to have the company wound up as the partners see "no prospect of an improvement in Bloxham's trading position."
Its largest creditors include NIB bank, who are owed €8.5m and the revenue commissioners who are owed €2.3m, counsel added.
Today at a duty sitting of the High Court Mr Justice Kevin Cross said he was satisfied to appoint Mr Kieran Wallace of the firm KPMG as provisional liquidator to Bloxham after being informed the company was insolvent, unable to pay its debts and its liabilities exceeded its assets by €13.9m.
The company, which the court heard is Ireland's oldest stock broking firm, is a member of both the Irish and the London stock exchanges. It is based in Dublin's International Financial services Centre as well as having offices in Cork, and Limerick and has more than 17,000 clients.
In addition Bloxham has a 83% interest in London based Sonas Partners LLP, which trades on fixed income securities in the UK.
In an affidavit to the court Bloxham partner Mr Patrick Dempsey said that they had believed the company was maintain its capital requirements, but the realisation of the true state of affairs "came as a total shock to me and to the other partners."
He said that he and the other partners will fully cooperate with Mr Wallace
Moving the petition Bernard Dunleavy Bl for Bloxham, which is a limited partnership, said that the Bloxham's partners unanimously agreed following a meeting on Thursday morning that the company should be wound up, and that a liquidator be appointed.
Counsel said that the company got into difficulties after it discovered that regulatory capital had been overstated by €5m. It was obliged to hold regulatory capital €5.6m.
Counsel said on May 23rd last Bloxham's partners learned from Tadgh Gunnell, its Finance and compliance Partner that it had been accounting misrepresentations including recorded a tax liability of €1.3m was recorded as an asset and not a liability.
A pre-payment of €1m to revenue in April 2011 and repayments of loans to directors of €1.7m were never recorded as having being paid out. After learning this, counsel said the company informed the central bank of its position.
As a result the Central Bank last week its ordered Bloxham to cease trading immediately, and forensic accountants were appointed. It's membership of the Irish Stock Exchange was suspended last Monday.
As a result, and the fact significant claims are likely to be made against Bloxham by various creditors, counsel said the partner agreed that the company should be wound up and a liquidator appointed to protect the assets.
Counsel said Bloxham has further agreed to sell its private client business, for €2.2m, and its fund asset management business, for €3.6m, to rival Davy stockbrokers. 21 of its 75 employees will transfer to Davy.
Counsel said that there was an urgency in appointing Mr Wallace for a number of reasons.
It was important to make sure the sales of the assets to Davy went through, that there was somebody to deal with the queries from Bloxham's clients, that somebody was there to instruct lawyers in litigation involving Bloxham in the UK.
In addition Mr Wallace was required supervise any potential sale of Bloxham's memberships of the London and Irish Stock exchanges.
Mr Justice Cross agreed to grant Mr Wallace a number of powers including the ability conduct negotiations to sell Bloxham's memberships of the two stock exchanges.
Mr Wallace was further given the power to facilitate the transfer of clients to Davy, take possession of its assets, carry on the business of Bloxham in whatever way deemed necessary to ensure an orderly wind up, and the power to dismiss employees.
He also granted Mr Wallace the power to investigate the company, its partners and its employees. The Judge who adjourned the matter to June 25th next, also made a declaration that the company's main centre of interest is Ireland.