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UKSolicitorJA, Solicitor
Category: Law
Satisfied Customers: 4312
Experience:  English solicitor with over 12 years experience
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Hi I was wondering whether there is a litigation solicitor

Customer Question

Hi I was wondering whether there is a litigation solicitor on the panel who knows about collective investment schemes. I and another family member as well as other family members invested into a property (An old mill already converted into 7 houses but we had finish off and pass buildings control before being classified as 7 properties) a few years ago. we drafted a simple agreement that stated how much everyone would get if the property resulted in a profit which included a high interest element based on their investment and 5% share of remaining profits (pro-rata to their investment). The interest element was introduced so that the investors would get the highest return and we as managers would get a bigger share of the remaining profits (after receiving interest the same as the investors). Two of us decided to take a lead and became the managers. However after the property crash the property plummeted in value. We offered to sell the property and we would take the losses pro-rata or we could mortgage and give them back monies pro-rata based on the value of the property. Now the other family members have issued (via another relative who is a lawyer on a no win no fee basis) us with court proceedings (in the county court) stating that we miss sold them was a collective investment scheme and as we are not regulated it is termed as a loan They are insistent that they want their full monies back plus the interest in the agreement (even though it clearly states that after the property is sold) even though it states that we would all receive if it yielded a profit. we had drafted an agreement inhouse feeling that trust was never going to be an issue of course they are some flaws in the agreement. Now we have instructed a solicitor and are seeing a counsel next week but we wanted some guidance as how to direct them as a mountain is made out of this hole! Surely the salient point here is that we have not marketed this to the general public and anyone can ask anyone to invest (family or friends) and it then comes down to the contract (legal interpretation) between the two parties that is in question as opposed to breaking the law? We want to make sure that the counsel and our litigation lawyer focusses on ridding this hallmark of a collective investment scheme rather then charging us a fortune!
Submitted: 4 years ago.
Category: Law
Expert:  UKSolicitorJA replied 4 years ago.

Sorry to hear about this.

As you are aware, your query concerns a very niche area of law which requires specialist legal advice by a solicitor who knows the ins and out of the Financial Services and Markets Act.

You have not said whose name appears on the deed to the property. I am assuming one or more of the family members?

It appears that what is involved is an unregulated CIS (UCIS) which does not involve retail consumers or the public in general but family members which means that there is no requirement for it to have been registered under the Financial Services and Markets Act 2000, see this guide from the FCA:

You need to defend the court claim on the basis that there was no requirement for registration under the FSMA as the investors are family members and not members of the public or retail investors, and that it was a private family arrangement as evidenced by the agreement which all the family members involved had voluntarily signed up to.

As such, the terms of the agreement should prevail and bind all the family members concerned.

Hope this helps