CHP 11/0097 - Foundations Program Plc (in liquidation) ("FPP")
CHP 11/0098 - FPA Limited (in liquidation) ("FPA")
Update 1 August 2016
Glossary
Foundations Program plc - in liquidation ("FPP")
FPA Limited - in liquidation ("FPA")
Joint Liquidators and Joint Official Receivers ("JL&JORs")
Update for Participants and Loan Note Holders (LNHs) and other creditors of FPP & FPA
Unsecured creditor claims
At the commencement of the liquidation, the Directors submitted a Statement of Affairs. This statement included a listing of expected claims against the Program. It would not be appropriate to disclose all individual creditors, but the various classes were as follows:
| Note | USD | |
| Canadian Agriculture Inc | 1 | 982,095 |
| Third party professional service providers | 2 | 482,879 |
| Directors claims | 3 | 133,878 |
| Related party claims | 4 | 544,247 |
| Total claims | 5 | 2,413,099 |
Notes
1 Canadian Agriculture Inc
This claim related to a purported loan made by CIA to FPP. Lee Barkman, director of FPP was also a director of CIA. There was no formal documentation supporting the purported loan. The JL&ORs made enquiries of the directors of CIA seeking further particulars. Receivers were subsequently appointed by the Canadian courts and further correspondence took place between the JL&ORs and the Receivers.
There was no disagreement that the funds were paid by CIA, by a circuitous route, into an FPP bank account. The JL&ORs reached the conclusion that the balance of the evidence that did exist, suggested that the purported loan was, in fact, the subscription to a 1 year Loan Note issued by FPA. Accordingly, the JL&ORs rejected the claim against FPP, but indicated that in principle a claim against FPA would be admitted.
The Receivers of CIA appealed to the Isle of Man Court against the JL&ORs’ decision. At a hearing on 28 July 2016, the Court ruled in favour of the JL&ORs and the rejection was upheld.
The significance of this decision is that had the claim been a valid claim against FPP, it would have formed part of the losses of FPP and would therefore have been recoverable in full from the Participants. The decision means that the claim in FPA will rank pari passu with all other creditor claims.
2 Third party professional service providers
These claims included the administrator, legal advisers, auditors and custodians. The JL&ORs were not satisfied that each claim was supported by the documents held by them and entered into correspondence with a number of the claimants seeking supporting documentation. A number were unable to satisfy the JL&ORs of the validity of the claims and rejected the proofs of debt. The date for objections to the rejections has passed. Accordingly, a total of $287,548 has been admitted for payment, the balance being rejected.
3 Directors claims
No supporting evidence was submitted with these claims. The JL&ORs gave the directors an opportunity to provide such evidence but none was forthcoming. Accordingly, the JL&ORs rejected the proofs of debt in their entirety. The date for objections to the rejections has passed.
4 Related party claims
The related party claims were in respect of companies with close associations to the Program and often with common directors. The claims were purported to be based on services provided to the Program. The JL&ORs were not satisfied that each claim was supported by the documents held by them and entered into correspondence with all of the claimants seeking supporting documentation.
No substantive evidence supporting the claims was provided and the JL&ORs rejected the proofs of debt in their entirety. The date for objections to the rejections has passed and accordingly, none of the claims is eligible for payment.
5 Summary
| Claims against FPP | Original claim USD |
Claim admitted USD |
| Canadian Agriculture Inc | 982,095 | - |
| Third party professional service providers | 482,879 | 287,548 |
| Directors claims | 133,878 | - |
| Related party claims | 544,247 | - |
| Total claims | 2,413,099 | 287,548 |
Policy realisations
The JL&ORs have continued to progress the realisation of policies. The table below sets out the current status and compares the outcomes with the values of the policies at the date of winding up.
| Note | Value at 23/11/2011 USD |
Realised values USD |
|
| Completed surrenders where realisations exceed 2011 values | 13,366,300 | 15,650,383 | |
| Completed surrenders where realisations are lower than 2011 values | 10,181,748 | 8,246,480 | |
| Partial surrenders with suspended investments retained pending future realisations | 1 | 10,464,366 | 3,000,489 |
| Agreed but not yet paid | 2 | 4,708,878 | TBC |
| Unresolved surrenders | 3 | 1,004,863 | TBC |
| Total | 39,726,155 | 26,897,361 |
1 Partial surrenders with suspended investments retained pending future realisations
These policies (thirty five in total) contain investments that cannot currently be realised. Published information concerning the likelihood of the suspended investments having value is limited. The JL&ORs propose to proceed with the other matters within the liquidation and to re-assess the position from time to time. Each life company is on notice to remit any proceeds that may arise from time to time immediately.
2 Agreed but not yet paid
The formalities for these policy redemptions have been completed and the JL&ORs are awaiting the receipt of the proceeds. The JL&ORs cannot be certain of the value of the funds until received.
3 Unresolved surrenders
This small group of policies are with life companies who have raised issues concerning the validity of the ownership of the policies or other procedural issues. The JL&ORs continue to seek to resolve all queries.
Directors’ action
The proceedings against several of the directors are continuing through the litigation process. However, a hearing date has not yet been set. Further information will be provided as soon as it is available.
Interim distribution
The JL&ORs and their lawyers are processing the necessary application to the Court to deal with the objection made by a Participant to the sharing of Program losses. This is a complex process and the JL&ORs are mindful that the issue is of considerable importance to Participants and LNHs. A further update will be published as soon as a timetable is available.
However, as a result of the objection and requirement for an application to the Court, when the issue regarding the allocation of losses is resolved, there will be more funds available for the initial distribution than was the case when the distribution was initially proposed (namely the sum of $5m). The JL&ORs currently expect the distribution to be not less than $9m.
1 August 2016