Recycling group produces more hot air than profits
Published Wednesday, 22nd July 2009
How many times must we have this lesson drummed into our heads: if something sounds too good to be true, it probably is.
That apparently was the case with a group of recycling companies that has wound up in the High Court for failing to deliver on promises of massive profits from recycled glass.
The group headed by Magna Group plc had claimed to be capable of generating wild profits from the extraction of polyvinylbutyral (PVB) from recycled glass sourced from vehicle windscreens. However, the group’s recycling plant near Selby in North Yorkshire failed to generate anything other than peripheral orders, mainly for recycled glass as a by-product. These sales totalled less than £40,000 over 3 years.
Prospective shareholders had been told the group would generate turnover in the tens of millions of pounds within 2 years of starting operations. Other claims made to shareholders concerned the existence of imminent orders that never materialised, expansion plans that did not come to fruition and the value of the business, which included one valuation of £150 million that proved to be totally unfounded.
In fact, the group was heavily insolvent, with estimated creditors in excess of £1.1 million as at the date of winding up. Due to the failure of Magna plc to keep proper records, it was unable to provide an accurate account of how many shareholders it has. The Companies Investigation Brance estimates the group had received up to £2.3 million from purchasers of preference shares, of which over 40 per cent of that sum was paid over to a third-party share-selling agent employed by the company.
Since re-registering Magna as a plc, the company only had one recorded director in contravention of Companies Act requirements for a minimum of two directors to be in post in a public limited company.
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