The Demise of Antique Wine Company (Franchising)

As you will probably have seen, the Antique Wine Company (Franchising) Ltd (AWCF), with its sole director Stephen Williams, has gone into liquidation, a resolution for winding up passed on 22^nd January, and the deadline for creditors to notify the liquidator of a claim named as 19^th February 2016.  It has also been renamed WC1 Realisations Limited, presumably to minimise damage to the reputation of the holding company, AWC Global plc.

The whole organisation has a far more complex company structure than one would expect from a relatively simple operation, and it bears examining.

It is also interesting to note that this is not the first incarnation of the Antique Wine Company to go insolvent.  In 1999, The Antique Wine Company (GB) Ltd, also with Stephen Williams as its sole director, was liquidated[1], having been consistently loss-making.  In 2004, Antique Wine Company of Great Britain (HK) Limited, registered in Hong Kong, was dissolved[2].  Shortly afterwards, Antique Wine Company (Asia) Limited, now AWC Estates Limited, appeared[3] – sole shareholder and sole director, one Stephen Williams.  Any of this starting to sound familiar?

Antique Wine Company (Franchising) Ltd (“AWCF”)

AWCF was the primary trading company, until March 2013 wholly owned by Heritage Corporate Trustees Ltd[4], a Guernsey based trust.  Such trusts are often used to shelter individuals from tax and scrutiny.  In March 2013 AWCF was sold to AWC Global plc (see below)[5].  The official reason was to raise finance – which was indeed done.  However, it is worth noting that it was in February 2013 that Julian LeCraw having suspected he had fakes in his collection, hired Maureen Downey to authenticate them, and shortly thereafter AWCF was notified on the impending lawsuit[6]. It was in the months preceding this that LeCraw, via his attorney, started to press more emphatically for payment for the wines he had consigned to AWCF.  It is also interesting to note that during 2013, the stock balance of AWCF decreased by £1.7m, while that of AWC Global… appeared[7].

The company made a substantial loss in 2008, a profit in 2009 to 2011, and then a significant loss in 2012, which it put down to the fall in the Chinese market for Lafite[8].

AWC Global plc

AWC Global was established, as mentioned above, in March 2013, and raised further finance in May 2014[10].  In 2013, it appears that the majority of the stock (i.e. wine) was moved from AWCF to AWC Global.  At the same time, there is £1m owed by AWC Global to “participating interests”, secured against “stocks to that value”.

Although I have not been able to find any details on Arcata Group anywhere, even if we assume this is not related to Stephen Williams, it is clear that he is still the majority shareholder of AWC Global and its sole director.  As such, it is not conceivable that he did not know the intention of AWC Global to support or otherwise AWCF.

What now?

I am not a lawyer, but I am aware of certain legal provisions relation to insolvency, in particular gratuitous alienation (s. 242 of the Insolvency Act 1986) and unfair preference (s. 239).  If I were the bank, the tax authorities, or one of the out-of-money creditors, I would be taking a keen interest in some of the transactions of the company in the three years before its demise.  There are some specific questions to which I would want detailed and proven answers to if I were owed money by AWCF, AWC Global, or Stephen Williams.

Questions I would be asking as a creditor or customer of AWCF

1. What were the assumptions on which the director based his forecast that enabled the auditors to sign an unqualified report in June 2015?[12]

2. The auditors stated that the forecasts assume continued and increased support from the holding company[13]. Since Stephen Williams is the sole director of both companies, one must assume he knew what was in the mind of the board of AWC Global in June 2015, find more info on http://thedublinroofers.ie/. Why was the support from AWC Global not forthcoming – and was it ever realistic to assume it would be?

3. In 2012, the AWCF wrote off £513,193[14] relating to debts from “companies authorised to use the Antique Wine Company name”. What were these companies, and what was their ownership?  Was Stephen Williams also a director of these companies?

4. The company blamed its poor trading in 2012 on the fall in the market for Lafite. It is true that Lafite decreased markedly in price in 2012 – according to Liv-Ex almost 32%[15].  However, the company was holding only £2.2m in stock[16].  Even if all of that was Lafite, that would be equal to a write-down of £700k.  How can the company assign a £1.4m loss to the decline in the market price for one wine?  Especially when the decrease in value of the stock held at the 2012 year end was only £0.2m.

5. In 2013, however, the fall in the value of stock held by AWCF was £1.7million[17]. There is no explanation given for this fall.  There is a decrease in trade creditors of nearly £0.9million, an indication of a reduction overall in the working capital of the business.  However, this leaves at least £0.8m, and probably more, unexplained.  At the same time, AWC Global’s stocks increased by £2million, from nil.  AWCF discloses sales to AWC Global of £1.2m and purchases from it of £1.3m.  Both of these would need to be almost wholly stock-related based on other disclosures in the accounts.  There is a debtor of £384k due to AWCF – does this relate to sales of stock?  And was this at a fair transfer value?

6. Stephen Williams’s Director’s Current Account in the consolidated accounts for AWC Global plc was £138k owing to the company in as at 31 December 2014. There was nil in the AWCF balance and nil in the AWC Global company balance[18].  Where did this money come from?  Has it been repaid? What is the current balance?

7. Who are the participating interests? What wine, EXACTLY, is their money secured on?  Where and how are they stored?  And are they authentic?

[1] The London Gazette.  www.thegazette.co.uk

[2] Hong Kong Company Registry http://www.cr.gov.hk/en/home/

[3] Ibid

[4] AWCF Published accounts, annual returns and shareholders statements as filed Companies House https://beta.companieshouse.gov.uk/company/03265130

[5] Ibid

[6] US District Court for the Northern District of Georgia, Case 1:14-cv-01149-JEC

[7] AWCF and AWC Global published accounts as filed at Companies House https://beta.companieshouse.gov.uk/company/03265130 and https://beta.companieshouse.gov.uk/company/07956423

[8] AWCF published accounts as filed at Companies House https://beta.companieshouse.gov.uk/company/03265130

[9] AWCF Companies House filing 25 January 2016

[10] AWC Global Companies House Filings 2013

[11] AWC Global Companies House filing 26 February 2015

[12] AWCF Accounts to December 31 2014, signed June 2015

[13] Ibid

[14] AWCF accounts to 31 October 2012

[15] Source: Liv-Ex

[16] AWCF accounts to 31 October 2012

[17] AWCF accounts to 31 December 2013

[18] AWC Global and AWCF accounts to 31 December 2013