A report in the Times asks pointed questions regarding a crowdfunding campaign by Recruitive Software that may have failed to disclose material information regarding the firm while the securities offering was ongoing.
The Times states:
“A collapsed software developer failed to disclose that it had fallen behind on tax payments when it raised £280,000 from crowdfunding investors, raising further questions about the growing subsector of Fintech. Recruitive Software, which sold programs to the HR departments of companies such as Harvey Nichols and is based in Cannock, Staffordshire, fell into liquidation last month owing £249,000 to HM Revenue & Customs (HMRC).”
If, in fact, Recruitive Software did not disclose the issue that it was behind in tax payments while raising money from investors, the company may have transgressed their fiduciary responsibilities. It was reported that Recruitive Software founder Richard Clarke experienced a serious accident that made him miss work for a “considerable period.”
The crowdfunding campaign was hosted on Crowdcube back in the spring of 2018 raising £280,000 from 148 investors. The company raised capital at a pre-money valuation of £4.825 million. Today, the firm is in liquidation. A signed the notice of insolvency was filed in mid-March. A meeting of the company’s members agreed to the company being wound up voluntarily around the same time.
On another note, it seems that online lender ThinCats may be out some cash too as there appears to be a note outstanding to the Fintech lender.
Yet more questions about crowdfunding as a founder has a serious accident, falls into arrears with HMRC – then raises £280,000 on Crowdcube without disclosing either fact. Brilliant story by @iamliamkelly:https://t.co/nZUz6ZHBl1
— olivershah (@olivershah) April 21, 2019
Investing in early stage companies is a risky venture as many, if not most, will fail. But if the report is accurate, the allegation that Recruitive Software failed to disclose material liabilities during an offering may draw the scrutiny of regulators. Another question that may be raised is the level of due diligence provided by the listing platforms. In a case like this, the platform may have been hard-pressed to have known about the tax payment arrears but, regardless, the scrutiny and ensuing coverage are not positive for the sector.
Have a crowdfunding offering you'd like to share? Submit an offering for consideration using our Submit a Tip form and we may share it on our site!