The government has accused a group of companies of “breach” of the scheme rules after they received £9million in taxpayer funding through Rishi Sunak’s Future Fund.
Administrators have announced that several businesses owned by Nova Group Holdings – a new investment group supported by Sir Terry Leahy – are now “insolvent”, after the British Business Bank, an arm of the British government, called in their loans.
In January, the former boss of Tesco (68) and Bill Currie (62), a fellow investor placed Nova in administration. The bank issued default notices to Nova and several of its Portfolio Companies to prevent Future Fund Loans becoming government equity stakes.
Nova Group Holdings, and the 13 start-ups it invested in, received £9 million as a taxpayer grant under the Future Fund Scheme. This was a pandemic program championed Sunak when he served as chancellor. It was designed to encourage innovative businesses.
A Nova Group subsidiary, Nova Cofoundy, repaid the Future Fund about £8,000,000 in proceeds to the group. Nova Cofoundy charged the start-ups a fee for its services.
In its final accounts, Cofoundy stated that the £8,000,000 it owed to the parent company by way of debt was “unrecoverable”. It was placed in liquidation before this, after HM Revenue & Customs accused Nova of a £3.5-million VAT scam.
Nova has vehemently denied that and stated that it is in dispute with HMRC regarding an innocent mistake committed by a former worker. The company also stated that “there is no evidence” that Nova’s capitalisation of its own balance or the use of that capital for investing via the Future Fund violated the scheme rules. Leahy and Currie have not been implicated in any wrongdoing.
Private investors had to match the Future Fund loan. If additional fundraising is possible, they can convert into equity.
Nova’s administrators said that in January their taxpayer-backed loans and those of the portfolio companies were in the process to convert to equity, but the Future Fund “issued default notices to Nova” and the subsidiary portfolio in order to prevent this conversion.
Administrators said that “Nova” and its portfolio “failed to dispute” any “breachs” of the scheme rules.
Future Fund loans are to be repaid at a “redemption premium” of 100 percent, effectively doubling state debt.
Nova, among the 11 businesses, has received default notices. The group of companies is believed to owe the government nearly £19million, including interest.
Administrators said that although only three companies appeared to be in formal proceedings of insolvency, they were all “unable to pay” their debts. Insolvency professionals added that other companies within the Nova group who did not receive support from the Future Fund are “likely” going to fail.
A bank spokeswoman said: “If it is found that parties have violated the terms of the [Future Fund], the bank has the right to take remedial actions to protect the taxpayers’ interest, including issuing formal demands for repayment and notices for default.” Commercial sensitivities make it inappropriate to comment on specific cases.
Nova’s Board was contacted for comment. Currie declined comment.