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Thursday, December 16, 2010

Mobile phone company ordered into liquidation after cashback failure

Mobile phone company MSols Limited, which traded as ‘Mobile Rainbow’, has been ordered into liquidation at the High Court.

The Insolvency Service found it had made no proper provision to make the cash back payments it offered, which led to over a thousand customer complaints.

The grounds alleged for the winding up were: Unscrupulous business practice and lack of commercial probity, False and misleading accounts, Improper distribution to shareholders, Insolvency, Inaccurate particulars filed at Companies House and Failure to co-operate.

MSols Limited sold mobile phone packages online through a number of websites. It had a business address in Watford but was mostly operated and managed from India.

The Insolvency Service says the ‘cash back’ business model appears to have been based on the assumption that only 40% of customers entitled to their cash back would submit eligible claims. The investigation identified that the redemption rate necessary for the company to break even was no greater than 27%. Redemption rates were considerably higher, with at least £750,000 going unpaid.

The insolvent company was abandoned by its director and the former company secretary.

Chris Mayhew, Investigation Supervisor, said “This case sends a clear message to unscrupulous directors; if you run a business that aims to rip off the public you will be closed down. I remind anyone thinking of buying anything online not to make a decision to buy based on a slick looking website. Take the time to read the terms and conditions, and be wary of any offer that looks too good to be true.”

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Author: The Fonecast
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