Personal Bankruptcy 1995 and Consequences
They do say that all successful entrepeneurs go through bankruptcy at least once in their careers, and that it is part of the learning process!
In my view, I would rather not have had the experience. It was a tiresome procedure, and of course one is not treated particularly well by the “authorities”: perhaps the most painful part of the process in the UK is that all one’s financial assets are frozen, or acquired, and the Official Receiver is also entitled to take over personal pensions. Bank accounts are not allowed, nor company directorships: any existing positions have to be vacated and shareholding assets surrendered. One is not allowed to become a Director again until discharged from Bankruptcy, which is normally a minimum of 12 months.
Reasons for my Bankruptcy.
The principal cause was that Land Securities Ltd – the landlord at 63 Duke Street – presented a Bankruptcy petition for non-payment of rent due under the Lease Agreement which I had personally committed to in 1991. Although they were within their rights to take this step, they were I think a little unreasonable, and were not prepared to negotiate with me.
There were rental arrears, and the reasons that I could not pay the sums due were twofold. Firstly, the economic climate at the time (early to mid ’90s) was dire, with high interest rates, and I could not attract reliable sub tenants to the building. Secondly, the demise of Nationwide Power Communications Ltd meant that I had effectively lost both the most important sub tenant and my consultancy income.
Of course, the forced closure of my successful Financial Services businesses 4 years earlier had not helped either.
Fallout from My Bankruptcy.
There was another “knock on” effect which I regretted even more and this was that my parents were also badly affected through my bankruptcy. Some years earlier, I had purchased a large country house for £180,000 inappropriately named Bruces Cottage, which was in some acres of land and was off the main road between Pewsey and Easton Royal in Wiltshire. My purpose in buying the property was two-fold: (1) as a joint investment and (2) to give my parents – especially my mother – a home that they would be happy to live in. My parents invested £40,000 from their life savings which was used as the deposit and I raised the balance of £140,000 as a second mortgage through my own insurance brokerage connections. I would be responsible for any mortgage interest payments.
When the bankruptcy occurred, Bruces Cottage had to be sold, and my parents were forced to downsize and move to a small but modern property in Netheravon, Wiltshire – where they spent the remainder of their lives. I do not think that I was ever truly forgiven.
NWZ Properties Ltd (NWZ)
In March 1987, I formed a property company called NWZ Properties Ltd in partnership with a customer of my Insurance Brokerage. This customer was a certain Michael Louis Zeffertt who ran a family clothing business called Robert Mack Ltd, trading in Portsmouth.
The purpose of NWZ was to purchase a particular commercial property in Portsmouth which we both hoped would in time provide a good return. Zeffertt was on the Portsmouth Local Council, and so had some knowledge of the plans to redevelop the area: my assistance was required to arrange the finance, in the form of a commercial mortgage. which I did through NEL Pensions, one of the companies with which my brokerage had an agency. Ownership of NWZ was split 50:50 by means of equal shareholdings.
When I informed Zeffertt in July 1995 about my bankruptcy, and therefore my inability to continue as a director of NWZ, his response was to arrange a boardroom takeover, and nullify my shareholding. In other words, he took advantage of my predicament and shafted me. Good business? Or another little shit from Portsmouth?
How Bankruptcy Affected Me
I was angry that it had happened, bitter about the previous experience with “Regulators” for closing my financial businesses for no good reason and shocked that “colleagues” in NPC and NWZ should behave as they had done: I did not blame Land Securities Ltd for their action, which was a result of my previous “misfortunes” and lack of personal judgement.
Obviously I had to work from my home in Chiswick, which I had had the good sense to put in my wife’s name some years previously. From this base, I could regroup, and make plans to rebuild my businesses. Money was tight, and I remember that I worked for a time selling tourist phonecards and souvenire items for a small business based in London called Crowns and Regalia: this was made more interesting as they supplied places such as Windsor Castle and the Tower of London.
One good thing happened to restore my faith in human nature. As I mentioned previously, Michele had an Austrian Godmother, Vroni, who was married to Gunter: they were also entrepeneurs, with a business trading in gold coins, and with homes in Lech in Austria and in Italy, and we were invited to stay with them for a week or so in Austria. Not only that, but they made a gift to us of £9000 which helped us survive before I got back “into the saddle”. I was very grateful.
Within a few months I was back in entrepeneurial “mode”, with a plan for a new telecoms company.