SOME OF the UK’s most senior insolvency practitioners have been referred by the Insolvency Service for consideration of disciplinary action over the work on the Comet administration.
Business secretary Vince Cable announced that the service had referred the work of Christopher Farrington, Nicholas Edwards and Neville Kahn to the ICAEW.
The referral relates to two key concerns. Firstly, that there was a potential conflict of interest when the three IPs, who had previously advised the company and connected parties, took on the administration.
Secondly, an employment tribunal found the employees had not been consulted on the potential for redundancies as legally required, with the court awarding a protective 70 to 90 day payout – leaving a potential £26m compensation package to be borne by the taxpayer.
Edwards sits on Deloitte’s board of partners, while Kahn is the global head of reorganisation services at the firm. Farrington is restructuring services partner at the firm’s Nottingham office.
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.
“There are also important issues of possible conflicts of interest which need to be fully considered.
“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.”
The Insolvency Service’s investigation into the insolvency of electrical retailer Comet in 2012 is still ongoing.
A spokesman 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 while 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, while 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.”
The ICAEW said in a statement: “Our disciplinary byelaws preclude us from commenting on whether any matter many or may not be the subject of consideration by our Professional Conduct Department.
“Where such consideration results in disciplinary action being taken then a public announcement will be made.
“Although we cannot comment on any individual matters, those same byelaws state that a member shall be liable to disciplinary action if he commits any act or default likely to bring discredit on himself, the Institute of the profession of accountancy.”
FRP Advisory sells business and assets of Harland Machine Systems Limited to Accraply Europe Limited
The UK’s decision to leave the EU has raised questions about whether the FRC's regulatory framework should change in the future
Manufacturer DMG Steelworkers has been sold out of administration in a pre-pack deal by insolvency and restructuring firm CVR Global
ICAEW has applied to become an approved regulator and licensing authority for five reserved legal activities, restricted in three of them to the area of taxation