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The London bank's board and new management were not aware of the outstanding debt to the U.K. tax authority until HM Revenue and Customs applied to put the holding company into liquidation on Thursday, according to three people familiar with the matter.
The holding company's board, chaired by private equity executive Harvey Schwartz and including Labour stalwart Lord Peter Mandelson, was busy over the weekend trying to shore up regulators' and customers' confidence in the new bank.
After a few unsettling days, the bank announced on Sunday it had raised £42 million in fresh funding from investors led by one of its directors.
The funding round, which the bank announced it had completed last month, was led by Mangrove Capital Partners, a Luxembourg-based investor with experience in Skype and Wix.com, and whose CEO, Mark Truszcz, has been a director of the London bank's holding company since 2018.
A spokesman for the bank said the new investment was unrelated to an HMRC winding up petition, which is filed when a company cannot pay its debts, adding that the petition had been the result of “administrative” delays and that the debt had recently been paid and the matter resolved.
The capital raise also comes just a week after the London bank announced that its founder, Anthony Watson, would step down as CEO and take on a senior adviser role.
Watson has long-standing connections to Britain's ruling Labour party, having served as chairman of the party's Business and Enterprise Advisory Council when it was in opposition.
Directors of the bank's holding company met regulators from the Bank of England's Prudential Regulation Authority on Sunday to discuss the bank's governance, according to a person familiar with the matter.
The petition to HMRC was a potential major challenge for the bank, which Watson launched with much fanfare in 2021 as a rival to the big four British financial institutions that dominate the payments market.
The holding company's subsidiary, Bank of London Group, received a license from the PRA last year and began taking on clients. Until this latest round of funding, the bank had been operating “hand to mouth,” according to a person with direct knowledge of its operations.
In a statement, the bank said it now has a “strong capital and liquidity position and is well-funded to execute on its strategic growth plans.”
In its latest financial results published for 2022, the bank posted a loss of £12.7m on total assets of £17.6m.
The bank said on Sunday that customer deposits had grown to more than £500 million last month, with the total number of customers exceeding 4,500.
Stephen Bell, the bank's former risk and compliance chief, who replaced Watson as chief executive last week, said that because the bank holds all its deposits with the Bank of England “businesses have every confidence that funds will be available at all times”.
Truszcz said the new capital injection reflected “investors' confidence in the company's leadership and unique model.”
An HMRC spokesman said it could not comment on individual cases, adding: “We take a supportive approach to dealing with customers who have tax arrears and work with them to find the best solution based on their financial situation.”
Watson, Mandelson and the Bank of England all declined to comment, and Schwartz could not be reached for comment.
