It has emerged that former chief executive Stephen Wicks and finance director Nish Malde, both founding shareholders of the business, had continued to run the business as if it was still their own private enterprise rather than observing Alternative Investment Market (AIM) rules. Inland Homes listed on AIM in 2007, two years after it was set up.
Breaches of AIM rules include how Inland Homes interacted with First Place Nurseries Limited (FPN), a primary education business also founded in 2005 by Wicks and Malde, with each owning approximately 40%.
In 2018 Inland Homes granted FPN a 20-year lease to operate at a property and temporary buildings for FPN’s Beaconsfield Nursery on Inland Homes’ Wilton Park development site. This transaction involved a related party for the purpose of the AIM rules and International Accounting Standard (IAS) 24, and required notification under the AIM rules. The lease was not disclosed to the board of Inland Homes , nor was it disclosed in the financial statements.
On 1st March 2023 Inland Homes announced that its then chairman and non-executive directors had resigned from the board, having become aware of what at the time were called only “related party issues”.
Two weeks later, with a new independent non-executive chairman in post, Matthew Robinson, FRP Advisory Trading was commissioned to conduct an independent review into these related party issues.
This review is now complete and the board is considering the report's implications for completion of the audit for year ended 30th September 2022. In April trading in Inland Homes’ shares on the AIM market were suspended because of its inability to publish audited accounts in time.
The report sets out other transactions between Inland Homes and First Place Nurseries that should have been, but were not, reported in accordance with AIM rules, and between Inland Homes and other members of the Wicks family.
No rent had been charged by Inland to FPN and no rent had been paid prior to the concerns being raised earlier this year. Invoices were subsequently raised and paid by FPN in March 2023. However, the rent calculation of £16,787 (excluding VAT) for the period from 26th November 2018 to 31st August 2022 was not supported by independent certification as required by the rental agreement. Inland is now seeking to obtain independent certification of the rent, as required by the rental agreement, and payment, if certified as due.
Over the six years between March 2017 and March 2023 Inland Homes paid £178,801 in relation to hire costs for modular temporary buildings used by FPN.
The investigation also found that In June 2022 and July 2022, FPN made two interest free loans to Inland Homes. There were no loan agreements, provisions for interest or security. The first loan, of £750,000, was received by Inland Homes on 16th June 2022 and repaid to FPN on 15th July 2022. The second loan, of £500,000, was received by Inland Homes on 25th July 2022 and repaid to FPN on 27th July 2022. As these transactions involved a related party, they required notification under AIM rules. The loan arrangements were not disclosed to, or approved by, the board of Inland Homes, so it was never in a position to consider whether the terms of the transaction were fair and reasonable for shareholders.
The FRP report also says that various Inland employees spent time on FPN projects at its Radlett and Bushey nurseries in 2021 and 2022 and these costs should have been, but were not, charged by Inland Homes to FPN.
The Inland Homes board said on release of the report findings: “The matters covered in the FRP report have revealed significant and repeated failures in board level corporate governance and failings of internal control in some areas of the group. The investigation also identified that certain information was not disclosed to the company's board, nominated adviser and the current and previous auditors. Since the events covered by the report, three new independent non-executive directors, Matthew Robinson as chairman, and Trevor Sawyer and Richard Padley, have or are in the process of being appointed in response to these historical failures in corporate governance, together with a new chief executive officer, Jolyon Harrison. A new chief financial officer will also be appointed in due course. Nish Malde, CFO and acting CEO, has advised the board of his intention to retire from Inland Homes following appropriate handover on Jolyon's appointment.”
To address the failures exposed by the FRP report, the board has updated the formal schedule of matters reserved for the board, created a register of related parties (under both the AIM rules and IAS 24) and introduced a formal written policy on related party matters and procedures.
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