AdSlot1

BDO hands Farepak creditor payment to Insolvency Service

BDO LIQUIDATORS have handed over dividend payments to Farepak creditors to the Insolvency Service.

Martha Thompson and Dermot Power, from BDO, were appointed joint liquidators to the collapsed Christmas hamper club in 2011, following an administration process that had ended.

In their role as liquidators they issued final dividend cheques to creditors with some still not cashed. Those creditors who have failed to cash their cheques must now contact the Insolvency Service to have them re-issued.

The liquidation process ended in August 2012.

Farepak collapsed in 2006 owing about £40m to creditors. Thompson and Power, were appointed administrators to Farepak on 4 October 2007. Thompson and Shagun Dubey, also from BDO, were previously appointed administrators to Farepak assets on 13 October 2006.

Unsecured creditors received a payout of about 32p for every £1 owed in July 2012, which included a dividend of 13p from an £8m ex-gratia payment, from Lloyds Banking Group.

Lloyds announced the goodwill payment of £8m after its subsidiary, HBOS, was dragged into a Farepak court hearing in 2012.

HBOS, which acted as a banker to Farepak, was criticised for forcing company directors to continue taking customer money when it knew they were unlikely to get those funds back, the Financial Times reported at the time. 

Unsecured creditors also received about 17.5p in the £1 from the Farepak Response Fund, a charity set up by the Department of Trade and Industry in 2006. It was estimated that 114,000 customers were owed dividend payments from the liquidators before the process could end.

Liquidators are required to transfer responsibility of unclaimed dividends to the Insolvency Service six months after the cheques are issued. The agency then holds the funds for six years, after which the money is returned to HM Treasury. However, unsecured creditors can still make a claim after the six years have passed.

Earlier this year the financial watchdog, the FRC, reprimanded former Farepak director William Rollason, who was also CEO of the parent company. ICAEW-qualified Rollason was accused of failing to act in accordance with the institute’s ethical code.

He was ordered to pay a £15,000 fine and £50,000 towards the FRC’s costs.

A settlement was agreed in which he accepted he had drafted and distributed to his fellow directors a memorandum which could mislead them as to the true financial position of the business.

However, he was found to have not acted dishonestly in eiher drafting and distributing the memorandum. 

EY is due to face a similar proceeding from the FRC, for its role as auditor of Farepak. A preliminary hearing to set a tribunal date and a tribunal hearing are due later this year.

Related reading

/IMG/966/313966/used-car
/IMG/001/242001/closed-sign-red
/IMG/001/242001/closed-sign-red
/IMG/001/242001/closed-sign-red