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Crowdcube's Mindflood DIYs its own Liquidation.

Mindflood or Patchworks, a tech company based out of NI, raised money on Crowdcube in 2015. Shareholders have heard nothing since 2016. Now in June 2019, they are told that the company is closing and they will receive some small change - donatable to charity.


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According to Mr Heinz (no relation) the founder, investors would receive 5p per share on winding up against the share price of 73p. He doesnt apologise or even mention how inconvenient this might be.

In 2016, the company issued 139k C Prefs to Techstart NI and one other much smaller investor. These shares had a catch - in the event of liquidation the holders were first in the queue after creditors to be paid out. So ahead of the Crowd. To confirm this the company passed a new set of Articles - only voted on by A SHs. Most of the Crowdcube gang were Bs.

So as the paperwork states, the sale of the company's IP to an undisclosed buyer for £250k has enabled the £136k paid by Techstart to be repaid in full. Phew for them. Was there some personal guarantee?

What's left has been calculated by Mr Heinz to give the Crowd 5p per share. This is after he has allowed for £30k to be spent on the DIY liquidation. No mention as to who gets this is obvious.

One positive here is that there are no creditors left unpaid. And of course, as Heinz is keen to point out, Save the Children can benefit if you dont want the small change causing a hole in your pocket.

Another interesting point is that the DIY calculation includes not only the payment in full of the C prefs but they are also included in an extra £7k share of the final pot - despite the fact that the Articles state they are not entitled to a dividend. We think that might be wrong - not that it makes any real difference.

The company made steady losses until all the investment was gone. 

What a mess after 4 years. Just shows that it is worth knowing your way around share issues, share rights and Articles of Association if you dont want a surprise email pinging your inbox.

Monday June 24, 2019

Hardman and Co’s Brian Moretta in conversation with ECF Buzz Founder Rob Murray Brown on start up investing, equity crowdfunding and what’s a good read.