Zolfo Cooper to issue update to creditors of failed credit hire firm
Drive Assist administrator Zolfo Cooper is seeking legal advice on the failed credit hire firm’s position with regard to client money after several cheques to clients bounced.
Drive Assist called in administrators on 10 December 2012, after the loss of a large client left it in financial difficulty.
Following the administration, some clients reported that cheques from the credit hire firm had bounced. This has prompted questions about whether money due to clients should have been ringfenced in a client money account.
Zolfo Cooper partner Alastair Beveridge, Drive Assist’s lead administrator, told Insurance Times: “We have been taking legal advice on the position of the client money. That issue is being worked through. It is not finally resolved at this point.
“A number of people have asked about that and about the position and we have said that we need to take legal advice because it is not clear as to exactly how things operated or how they should have operated.”
Beveridge confirmed that Zolfo Cooper had been in contact with the FSA about the Drive Assist situation in general.
The regulator has asked Zolfo Cooper whether there were client money accounts, which the administrator answered on 17 January, but as yet there have been no more specific questions about client money.
The regulator’s questions have so far focused on how Drive Assist failed and its operating processes.
According to the FSA register, Drive Asist is able to “hold and control client money only in respect of non-investment insurance contracts”.
The client money questions have come from people trading directly with Drive Assist and have been handled bilaterally, Beveridge added.
Beveridge also confirmed that there was no prospect of Drive Assist being sold to a new owner and being restarted. Zolfo Cooper’s focus will be on selling the assets and paying creditors.
He said: “It is basically going to be an exercise of trying to get as much money in as we possibly can across the board.”
The company would be difficult to revive because after it went into administration it was forced to stop trading. Vehicle financiers demanded the return of their vehicles, leaving Drive Assist unable to conduct its business normally. On realising this, insurers that were referring work to Drive Assist left for alternative providers.
Beveridge said: “Because that business has effectively been lost, it wouldn’t quite have to start from scratch but it wouldn’t be far off.”
Drive Assist UK issued a statement of affairs at the end of last week showing that its assets fall £42.7m short of what it needs to pay creditors.
Among the creditors are big name insurance companies such as Swinton, which is owed £2.5m, and Esure, which is owed £1.4m.
Zolfo Cooper expects to issue a statement of proposals to creditors this week, detailing its plans for Drive Assist and highlighting any issues it finds with the statement of affairs.
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