In case you are not aware, I founded rpoints.com (via my company Rpoints Limited) back in 2003 which was one of the first ever UK cashback websites. It was very successful for several years but then things took a turn for the worse and ultimately the company was wound up in November 2010, with some members losing out on their unpaid cashback. (Note: rpoints.com has since been acquired by another company from the liquidator, and any subsequent references to 'rpoints' should be taken to relate to the old company "Rpoints Limited" or the rpoints.com website while it was under the control of that company.)
So why talk about it on imutual? I consider that others were largely to blame for this outcome (as you will see from my account below) but inevitably there have been posts on forums along the lines of "RY was the director of the company at the time Rpoints Ltd was wound up, so don't use imutual". If such views go unchallenged, they might deter people from supporting imutual, which is not in anyone's interest. So although I really don't want to dredge up these historical events, I do think people should be able to read my account of what happened, be able to ask questions and take an informed view.
So let this topic act as a source of reference for what happened at Rpoints Limited.
A brief recap on the history of Rpoints Limited. I founded the company in 1998 (then known as Web Centre Limited) and launched rpoints.com in 2003, at which point the company was renamed to Rpoints Limited. Up to 19/2/2007 I was the sole director, and myself and Mrs Y owned 100% of the shares. The company was highly successful and profitable but I was persuaded to take on two business partners - Ian Wells and Eduard Sparkes - in the expectation of securing major corporate deals and generating significant growth of the company. I will not dwell on the detail of that 'era' just now, suffice to say that these 'partners' put no money into the company and took significant stakes (by virtue of their company Mobius Group acquiring 100% of Rpoints Limited); any money paid to myself and Mrs Y by Rpoints Limited up to that point was paid out of company funds generated by our own past efforts. I became a minority shareholder (in Mobius Group) and stepped down as a director of Rpoints Limited, replaced by these two 'partners'. I remained an employee and certainly retained an influence on aspects of management of the company; but 'influence' is very different from 'control'.
There is one major aspect of this deal that I have not publicised to date, which might go some way to answering the question "Why on earth did I do that deal?". In return for having effectively 'given away' two thirds of our company, Mrs Y and I were to receive £400,000 after six months and a further £400,000 after 12 months. This “deferred consideration” was structured as loan notes and secured with debentures against both companies. More of that later....
One forum post tried to imply that at the point I stepped down as a director (19/2/07) the company was left with insufficient funds to pay creditors. This is totally untrue, and I offer the following facts in support of my rebuttal:
As part of the 19/2/2007 'deal', the company's accountants (a large and reputable firm of chartered accountants) were required to audit financial statements and provide a statutory declaration on the net asset position of the company. The purpose of this was, in part, to ensure that post-acquisition the company had sufficient financial strength and forecast revenues in order to meet future liabilities. They certified that the company did indeed meet these criteria, and I don't recall anyone involved in the company either then or afterwards suggesting that this was an issue. Indeed, the new Directors signed a statutory declaration in front of solicitors to vouch for the financial position of the company.
Briefly fast-forwarding to the ultimate insolvency proceedings, the major creditors of the company at the time of the winding-up petition were: HMRC (by far the largest), the members, BMW Finance and the landlord of the London office. To suggest that the financial position of the company back in February 2007 was the cause of the company's problems is patently absurd given that:
- There were NO overdue payments to HMRC at at 19/2/2007
- Members unpaid balances were written off after 12 months of being unclaimed, so any balances as at 19/2/2007 were of no consequence to the insolvency nearly four years later
- The BMW debt (circa £15k) relates to a company car used by Ian Wells since late 2007 which he failed to return at the end of its lease period
- The company did not even have a business relationship with the London landlord until 2009!
In fact, the company was highly profitable and well-regarded at this point, and the only money I received from the company post-19/2/2007 was salary. The gross salary of myself and Mrs Y combined was equivalent to that paid to each director individually, and in my opinion myself and Mrs Y contributed far more to the bottom line of the company than either of them (they made no significant contribution to the running of the websites).
"What about the £800k?" I hear you cry. Ah, what indeed
Post 19/2/2007 the financial performance of the company under its new directors deteriorated considerably, and come the time to pay the first £400k they said that the company had no means to do so. At this point, as secured creditors of both companies, myself and/or Mrs Y could have wound up the company and claimed any excess cash for ourselves in preference to all other creditors (including members). Perhaps, with hindsight, we should have done exactly that but instead we elected to write off the entire £800k in order that the company remained solvent. The only condition we made was that one of the directors stepped down and transferred the majority of his shares (in the holding company Mobius Group) to me; although I still held less than 50% of the shares. At this point (end of 2007) the sole director of the company was Ian Wells, and this remained the position up to July 2010.
There is a lot more that I could say about the way Rpoints Limited was managed post 19/2/2007 but for now I am limiting myself to rebutting specific allegations. Suffice to say that increased operating costs (including Directors and shadow directors salaries and related expenses) was one of the key factors in the company's demise. In the accounts y/e 30/4/2006 (the last full year I was 'in charge') the administrative expenses (i.e. salaries and other overheads) were £47,691. In the year up to 30/4/2008 this had risen to £520,454 and up to 30/4/2009 (the last year for which accounts were produced) it rose again to £569,326 with the company recording a pre-tax loss (the first in its history!) of £131,618
One rather ridiculous comment implied that, because I had access to the bank accounts and "complete operational control", I was somehow in control of the company's costs. My access to the accounts was retained primarily so that I could make weekly member payments. I was not a Director of the company (until 7/7/2010) and did not have authority to withhold salary / expenses / supplier payments (such payments were usually made by the company's book-keeper on the direction of management).
As an aside, a third 'partner' was brought in during 2007 on similar terms and on the recommendation of Ian Wells - Brad Rosser - who took a chairman-type role within the company. I believe that Ian's wholehearted recommendation to bring Brad into the company, and his ongoing support for Brad's approach and decisions, had a significantly negative effect on the company. I found Brad to be a domineering character with a verbal style that made him difficult to oppose. It was difficult for me to influence expenditure on administrative overheads, though I did at least persuade them to show modest restraint on management salaries. Brad would also, at times, give direct instruction to staff who worked on the websites, so to insinuate that I had "complete operational control" throughout the period is not correct.
I was instrumental in removing Brad and some of his associated costs at the end of 2009, despite Ian's opposition to this. This gave the company a better chance of turning its fortunes around but there were still financial issues; an expensive office in London that we no longer required (but were tied into a 3 year lease), plus significant PAYE/VAT debts that had built up. I also believed that Ian was contributing very little to the company and did not justify his generous salary, plus some matters that had come to light led me to be increasingly distrusting of him. There ensued a 'falling out' between us and I think it's fair to say that those involved during 2010 found themselves either taking Ian's side or mine.
On the old Rpoints forums I posted at length about the sequence of events between April 2010 and Ian being removed as a director. I'm not going to re-post all of that detail but to understand the background to the demise of Rpoints Limited you do need to know things about Ian Wells and his conduct. A historical fact that came to light during my business relationship with Ian was that he was, many years ago, arrested in connection with the murder of a young woman. Though never charged (another woman, Ian's then girlfriend, was convicted of the murder) Ian was described in court proceedings by an expert witness as "displaying symptoms of a sadistic psychopath". See here and here if you have the stomach for it. The case, and Ian's behaviour in particular, was the focus of an ITV documentary Women who kill. You might think, as I initially persuaded myself, that this old incident has no relevance to Rpoints but having watched that documentary I am strongly of the view that it does. I believe there are aspects of Ian's character and more recent behaviour that resonate with that episode. He can come across as a very plausible and persuasive character, and in my experience (and that of several others) there is often a wide gap between what he leads you to expect and what is reality. He has been involved in a number of businesses in the past which are no longer trading, and several people have since come forward to me to detail their bitter experiences with him. Those who read my original posts on the old rpoints website will recall mention of other irregularities within the company, such as unsatisfied director's loans, missing client payments, duplicate salary payments not accounted for etc. To the best of my knowledge, these are still unresolved to this day and goodness knows how many other things have gone on that I am unaware of.
To summarise events surrounding Ian's removal as director on 7/7/2010: There seemed to be no way to force him out as a director, as he refused to go and had the support of two other shareholders (who no doubt bore a grudge against me for having previously forced them out of the company). I certainly did not want to walk away from the company I had founded so many years ago and leave it in the hands of Ian Wells but I appeared to have no choice. In agreement with IW, I developed and launched imutual and agreed to step down from Rpoints, with two former employees supposedly being brought in to manage rpoints. IW then failed to honour several elements of this agreement (we never received a salary for June, for instance) and instigated the posting of untruthful and damaging statements about me, both on Rpoints and elsewhere. Nobody was managing the websites and they appeared to be descending into chaos. This was unacceptable to me and, fortunately I then realised I did have another option. I managed to remove Ian as director at an EGM of the company, which I had properly requested several weeks earlier. Much 'noise' has been made by IW about the process by which I did this but it was a legitimate EGM. All shareholders were properly notified of the EGM, and all those present approved Ian's dismissal as director and me being appointed in his place. No subsequent EGMs were properly called, though I did agree to meet with shareholders in August where a vote took place on Ian's reinstatement. Again, IW lost the shareholders' vote.
Two days after Ian's removal, he emailed me a Heads of Terms agreement he had apparently negotiated with another company (a competitor of ours I shall refer to as "Company B"). Note: Company B still operates cashback websites and, having no wish to to engage in any 'war of words' with other companies, I would be grateful if members avoided any further discussion of / questions about their role in this. Thanks
Clearly Ian and Company B had been in contact for some time. It appeared that the plan of bringing former employees in had not succeeded and he had been forced to look for an alternative. The 'proposal' involved Company B taking over the running of Rpoints Limited's websites, with Ian being reappointed as director of Rpoints Limited in my place. I telephoned the CEO of Company B to inform him of the situation and he said he had been under the impression that everyone (including myself) was supporting this 'deal'. I said this was not the case and also made clear to him my opinion of IW and his role in Rpoints. Despite this, Company B continued to express interest in such a deal despite my stated opposition to Ian. The 'deal' itself was clearly a non-starter, not least because it did not provide for sufficient payments to be made to HMRC re: all outstanding debts. Nobody had secured HMRC's agreement in putting this deal together and as such it would have been improper for the company to cede control of its most valuable assets.
Having been reinstated as the sole director (on 7 July), my priorites were to stabilise (and if possible improve) the performance of the company and establish the exact financial position to determine if the company was viable. I concede that it was an unusual situation to find myself now in charge of rpoints and also the newly-launched imutual, but it is not true to suggest that imutual had any material impact on the performance of rpoints from this time onwards; imutual had to take a back seat. What DID affect my ability to manage the company was the considerable time dealing with threats and accusations from IW and others during this period. I was also not helped by the fact that the accountant, after contact with IW, decided she could not assist me (despite previously agreeing to do so) and I had no access to historical financial information.
Based on figures available to me, I believe the trading position of the company did actually improve slightly during the next few months - a remarkable turnaround given the situation I inherited. Overheads were significantly reduced and cashflow was sufficient to meet the current level of payment requests from members. However, there was still the issue of historical creditors. I contacted HMRC to clarify the position, having been under the impression that the company's outstanding VAT and PAYE/NI debts were the subject of a "Time to Pay" agreement. It turned out that this agreement only applied to the VAT element and that the relevant section within HMRC had been unaware of the PAYE/NI debt when agreeing to this. The combined debt was over £250k. Not only that, there was a potential corporation tax liability resulting out of an ongoing HMRC investigation; the tax issue was complex but suffice to say it was necessary to clarify and resolve that situation in order to assess the company's solvency.
During this time, the company took advice both formally and informally from several financial and legal professionals; and I acted accordingly and appropriately at all times. The judgement I made, based on advice received ,was that creditors' interests were best served by continuing to run the websites until a way to resolve the company's future could be agreed, and to only make payments which were necessary to maintain the running of the websites (including paying members, hosting costs and salaries of essential staff). By the end of September, HMRC had clarified the position re: the tax investigation and it was clear that the company was going to be unable to meet debts falling due. At this point, I engaged an independent insolvency practice to advise the company and called for an EGM of shareholders to appoint them as liquidators as part of a creditors' voluntary liquidation.
I have seen numerous comments on forums questioning why the company did not cease to trade sooner. Some of these comments seem to be based on a false understanding of a director's position in such circumstances, but members should also be aware of the considerable pressure exerted on me to NOT cease trading by IW and another shareholder, and you need to understand the sequence of events that followed. When a director considers a company to be insolvent, his responsibility changes from acting in shareholders' interests to acting in the best interests of creditors as a whole. The clear advice from the IP (and others) was that a liquidation and pre-pack sale of the assets was the only sensible way forward; what this meant was that the websites would continue to operate for the time being until a buyer could be found to take on these assets (but not, sadly, the members balances). The IP was adamant that any attempted rescue of the company e.g. a Creditors Voluntary Arrangement (CVA) was highly unlikely to succeed and that shareholders should follow their recommendation without undue delay in order to best handle the situation. The other shareholders refused to cooperate with this process; instead, they were determined to pursue a CVA in conjunction with Company B and I was obliged to spend considerable time in dialogue with, and providing information to, Company B and then trying to persuade both HMRC and the landlord (who by this time was threatening to issue a winding-up petition) to accept the CVA. In might interest readers to know what the proposed director of Rpoints Limited under this CVA proposal was to be Ian Wells. Both creditors rejected the proposal outright, as I and the IP had predicted, but by this time it was too late to organise a clean pre-pack sale as originally recommended....
I learned during November that the landlord had presented a winding-up petition to the courts against the company, and the publication of this was imminent and this would most likely result in the freezing of the company's bank accounts. As there was now no prospect of any alternative action, I had to cease the cashback operations of the websites and made a public post to explain the situation to members. The winding-up petition was heard and passed on 24 November.
One of the allegations made is that I should have paid the petitioning creditor (i.e. the landlord) out of the company's funds in order to remove the winding-up threat. I have had it confirmed from several qualified sources, including the insolvency service themselves, that to do so would have been improper as I would have been favouring one creditor over others. There was no point in paying off one (relatively small) creditor if the company was still insolvent and this would leave less funds to be distributed to other creditors (including members). Despite making this clear, other shareholders applied considerable pressure on me to make such a payment; Ian Wells even went to the extent of attending court to put in a rescission application (an attempt to reverse the winding-up of the company). See excerpt below from my email exchange with a senior officer at the Insolvency Service dated 25 November (certain names and figures have been replaced with asterisks):
Their reply:Hi ******, I hope you can help
I am the sole director of Rpoints Limited (reg 03591130) which was the subject of a winding-up petition heard and passed in the high court yesterday (ref 8214/2010). The petition was issued by the landlord of the company's previous office (long since vacant) for a sum of circa £12,000. However, one of the shareholders has made a rescission application, to be heard next Wednesday, and has instructed me to pay this money from the company's account to settle the landlord's debt.
The total creditors of the company are circa £***, including nearly £***k owed to HMRC, and assets are < £***k. A possible CVA has been explored but rejected outright by both HMRC and the landlord. The company is clearly insolvent and even the landlord's solicitor is mystified as to the basis for this shareholder's recission application
My position is that I cannot make any such payment because:
a) The company has been wound-up!
b) I cannot favour the petitioning creditor over others if the company is insolvent
But I would just like to check that with you
So forum posts insinuating that I could and should have avoided the winding-up are totally without foundation.Hello Richard
You are correct in your assumption as the Rescission application will only be successful if all the creditors are paid in full or they all agree to a partial payment.
This is clearly not possible so no payments should be made until the matter is in front of the registrar.
If you've got this far through the thread then you really are a sucker for punishment
I certainly don't consider that I am blameless for the Rpoints episode (and have said as much in the past); not least because I allowed myself to be deceived in the first instance and then missed opportunities to do something about it until it was too late. But in the final 12 months of the company, I believe I did the right things and, if I do say so myself, showed considerable courage in what was a very unpleasant time. It would also not be fair to lay ALL the blame on other directors; the cashback market became much more competitive during this period. However, unnecessarily high salaries and overheads combined with mis-management and the failure to bring in expected 'corporate' deals were clearly the main reasons for the company's demise.
I hope this reassures people that I am a capable and trustworthy director of imutual. I believe members should be ecnouraged that I demonstrated the ability to grow a very successful online rewards company from scratch, but also that I have learned a few important lessons along the way (i.e. what not to do and who not to do it with!
). The Rpoints experience helped inspire me to create imutual, a PLC owned and controlled by its members and hence protected from some of the problems experienced by Rpoints Limited. A Phoenix from the ashes, if you likeBut if you have any major concerns arising from the above, feel free to ask!