Investments  

Hotel investment scheme director banned after misleading investors

Hotel investment scheme director banned after misleading investors
 

A director behind a hotel investment scheme has been disqualified for eight years after allowing the company to “mislead” investors.

Keith Michael Stiles, from Donegal, Ireland, was appointed a director of Kayboo Limited in 2012, two years after its incorporation.

The company purchased the Hurst House Hotel in Laugharne, Carmarthenshire, in 2011 and renamed it The Corran Resort and Spa.

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Stiles was responsible for the company’s investment scheme, a fractional ownership scheme, that secured funds to expand the hotel.

The scheme saw Kayboo grant a 999-year lease on each hotel room to a company limited by guarantee, which would then grant a sub-lease to the hotel operator who would pay rent.

Investors would purchase membership in the company limited by guarantee, representing a fraction of a room, and become entitled to a share of the rent paid.

Kayboo went into administration in October 2016, prompting an investigation by the Insolvency Service which uncovered £6.4mn recieved by Kayboo.

However, the company only registered three leases for investments worth £585,000.

The Insolvency Service found that Kayboo misled investors to believe that another scheme to develop 28 rooms in a nearby location was low-risk, the property (a semi-derelict farmhouse) was safely secured and that they would be protected if the company became insolvent.

Kayboo received £10.6mn from investors for this project, however no leases were registered and most of the property was never purchased.

Secured lenders also did not give any permission for the scheme.

Stiles was handed an eight-year disqualification after he did not dispute that Kayboo mislead investors, as well as securing over £500,000 of deposits after he should have known that the company was insolvent.

From October 28, Stiles is banned from directly or indirectly becoming involved in the promotion, formation or management of a company without the permission of the court.

Chief investigator for the Insolvency Service, Mark Bruce, said Stiles allowed his company to misrepresent the true risks of its complex investment scheme to investors. 

“Furthermore, he allowed the company to continue taking hundreds of thousands of pounds worth of deposits when he should have known that the company was insolvent and unlikely to honour its future commitments.

“Thankfully Keith Stiles has been removed from the corporate arena for a significant amount of time. 

“His disqualification should serve as a stark warning that we will investigate failed investment schemes such and sanction directors who mislead the public.”

sally.hickey@ft.com