This site uses cookies; by continuing to use our site you agree to our use of cookies. More details in our privacy policy. Close

 

 

Cable takes Comet administrators to task 25 July 2014

Business Secretary Vince Cable has announced the administrators of collapsed electrical retailer Comet have been referred to the Institute of Chartered Accountants in England and Wales (ICAEW).

Insolvency practitioners Christopher Farrington, Nicholas Edwards and Neville Kahn of Deloitte have been referred over a potential conflict of interest, given they had previously supplied advice to the company and other connected parties.

An Employment Tribunal also found Comet employees were not consulted on potential redundancies as required by law, resulting in a potential compensation package of £26m, paid by the taxpayer.

Cable said: “The taxpayer now faces a multi-million pound compensation bill as result of the failure to consult employees. There can be no excuse for failing to comply with the law which is very clear in this area. It is vital that the regulator establishes why this happened and whether disciplinary action against the administrators is appropriate.

“Cases such as these reinforce the need for a stronger insolvency regulation regime which will give us new powers to ensure regulators take firm action where abuse is found. The Bill I am currently taking through parliament will ensure these changes to current law are made.”

President of insolvency trade body R3, Giles Frampton, said: “Current legislation on collective redundancies may be clear but it is often difficult, if not impossible, to implement in some insolvencies.”

“In some cases there will be little or no money available to the insolvency practitioner to pay for a full redundancy consultation. Even where there are funds available there may be no realistic alternative to the proposed redundancies.

“This has been a problem for a number of years, but so far government has shown no appetite to amend the law. We call on government to sort this out as a matter of urgency. It’s a problem within their power to solve.”

Comet collapsed into administration in November 2012, resulting in the loss of 7,000 jobs and the closure of its 236 UK stores by December 2012.

The insolvency prompted the Department of Business Innovation and Skills (BIS) to launch an investigation into OpCapita’s acquisition of Comet and the insolvency process of the retailer.

OpCapita acquired Comet for just £2 in February 2012 from previous owners Kesa (now named Darty), funding Comet through loans secured against its assets, and was issued a £50m dowry from Kesa to run the chain.

In August 2013, an administrators reported filed at Companies House detailed that Hailey Acquisitions Limited (HAL), the vehicle used by OpCapita and its investors to acquire Comet, had been paid £54m as a secured creditor of the business.

However, unsecured creditors, including HM Revenue & Customs, suppliers and landlords, are owed approximately £233m and will receive less that 1p in the pound.

A spokesperson for Deloitte said: “We note today’s announcement and will cooperate fully with any investigation. However, we strongly disagree with the suggestion of a conflict of interest. It is not unusual for an administrator to be appointed to an insolvent company following a period as an adviser. Indeed, the administrator having knowledge of a company’s financial and commercial challenges is generally beneficial to all creditors and employees.

“Once appointed, the administrators, along with our advisers and Comet management, worked tremendously hard under very challenging circumstances to provide consultation to nearly 7,000 employees across more than 250 sites.

“All employees were notified in writing of the risk of redundancy and consultations took place at sites in a very tight timescale and whilst significant efforts were being undertaken to rescue the business. Union representatives were also invited by the Administrators to participate in consultation meetings.

“The administrators organised jobs fairs and employability events which were attended by hundreds of Comet employees, whilst Job Centre briefings were held at Comet sites. A helpline was set up to assist employees and a website was created where more than 50 prospective employers posted available positions.

“Comet staff acted professionally and with great passion for their company throughout this period. Regrettably, it proved impossible to find a purchaser willing to save the business and the employees ultimately had to be made redundant.”

 

 

blog comments powered by Disqus