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Insolvency Service targets carbon credit companies

The Insolvency Service has wound up 19 carbon credit companies in the public interest in the last 15 months, the Government announced last week. Two directors have also been disqualified.

The agency was acting under powers that entitle it to investigate not only the affairs of companies that are subject to insolvency proceedings, but also the affairs of actively trading companies - where there are “reasonable grounds to suspect fraud, serious misconduct, material wrong-doing or significant irregularity”.

According to the Insolvency Service, the carbon credit companies subject to the most recent action received a total of nearly £24m from over 1,500 investors, in return for which the investors received nothing or valueless carbon credits.

The companies were found to have targeted mainly older people and sold them Certified Emission Reduction Units (CERs) – or carbon credits - using high pressure sales techniques. Most of the victims ranged in age between 50 and 85 years.

Salesmen played on people’s keenness to ‘do their bit’ to save the environment while making an investment at the same time. Investors were promised huge returns by selling these credits to corporate giants such as Marks and Spencer and British Airways. However, most found that there was no market for the relatively small amounts they held, as companies that trade CERs only trade in high volumes.

According to the Insolvency Service, there have been an increasing number of companies selling carbon credits in recent years. Sometimes these carbon credit companies can also involve VAT fraud and insolvency proceedings, coupled with directors’ disqualification, offers the enforcement authorities a quicker and cheaper route than criminal prosecution. More insolvency and directors disqualification proceedings can be expected in the future.

Contact Jonathan Fisher QC

For specialist advice on issues of corporate, regulatory or financial crime, contact Jonathan Fisher QC on +44 (0)20 7427 463 or click here to make an electronic enquiry.

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