Administration of London Capital & Finance gets extended

Smith & Williamson LLP, the joint administrators of London Capital & Finance Plc, have provided an update on the matter.

On January 16, 2020, a court order was made approving the extension of the administration of the company until January 29, 2022. The administration has been extended to allow the joint administrators to continue with their investigations into the company’s failure with a view to maximising recoveries for the company’s creditors, especially the bondholders.

The extension of the administration is a statutory matter and is an entirely normal procedure for an administration of this size and complexity, the administrators explain.

The Joint Administrators’ second progress report, detailing the six months of the administration from July 30, 2019 to January 29, 2020, will be delivered to all bondholders by the end of February 2020.

In the meantime, the UK Financial Services Compensation Scheme (FSCS) has said it will protect the 159 bondholders who switched from stocks and shares ISAs to LCF bonds. Customers in this category are not required to take any action. The Scheme is set to pay compensation to these customers by the end of February 2020.

The Scheme, however, is unable to protect the 283 bondholders who dealt with LCF before it was authorised to carry out financial services business (on June 7, 2016).

FSCS maintains that the act of issuing mini bonds is not a regulated activity, and is therefore not something protected by FSCS, the Scheme has determined there will be some customers who were given misleading advice by LCF and have valid claims for compensation as a result. However, FSCS expects that many customers will not be eligible for compensation on this basis. FSCS will provide a further communication with details of when and how customers in this category can submit their claims. The Scheme will aim to start reviewing these advice claims in the first quarter of 2020.