Findlay Publications Creditor Complains to OFT
Older readers might remember that Findlay Publications fell into administration last year and then come back to life. At the time Ed Tranter, a director, said that the only reason this had happened was to deal with the liabilities in the final salary pension scheme.
One of the consequences of this process (what is called a pre pack administration) is that creditors in the old company can get short changed. One former freelance Editor who claims he is owed £3500 by the old Findlay is incensed by what has happened. WHen he tried to chase his debt he was told that this was a matter for the administrators not Findlay Media. He argues that the directors, products, address, telephone number -even the receptionist who answers the phone are all identical to the now defunct Findlay Publishing. He alleges that the administration was triggered when the bank called in a personal guarantee from the Chairman. He suggests that the company was bought back by the directors for an amount equivalent to the guarantee plus the administrators fee, leaving nothing for the creditors.
Pre packs are controversial. USed wisely they can often be the only way to secure the future of a business and its employees. As the complainant points out however, an adminstrator is supposed to act in the interests of creditors even though he is appointed by the management.
This particular freelance editor was so incensed that he initially took the matter up with Kent Police. My guess is that nothing illegal has happened here but there is an interesting moral principle. The matter is being taking up with the OFT which is currently engaged in a review of the pre pack process.
My own personal view is that whatever insolvency law states, it cannot be morally right that the only people out of pocket in the process are the small creditors. It is also true, that from time to time pre packs are used cynically.
I am sure that in this case Findlay directors acted entirely properly and leaglly but creditors who have lost all their money, would no doubt want to be reassured that
1) The reasons for the administration were unavoidable and all other possible courses of action had been explored (a creditors voluntary agreement for example).
2) That when the directors realised there was a solvency problem that all their decisions were in the best interests of the creditors first and the shareholders second.
3) If the underlying problem was an unfundable pension deficit why wasn't the new company funded with sufficient working capital to make some payments to old company creditors.