April 16, 2024
By Kate Heaney
Background
Ted Baker was purchased by Authentic Brands Group (a US company) back in 2021 for £211 million. They currently have 46 stores and multiple concession stands across the UK and Europe with nearly 1,000 members of staff.
What happened?
Ted Baker’s downfall can be attributed to a few factors, including the loss of its company founder as well as market conditions and internal accounting issues. A partnership with Dutch company AARC, who failed to meet financial obligations and inject promised funding into the business, also left the business in a comprising position.
The scale of Ted Baker’s financial trouble is still unclear; however, the intention is to continue trade to fulfil customer’s orders during the administration process. Notwithstanding this it has now been announced that 11 stores will be closing and 120 jobs will be lost as soon as 19 April. The stores closing have been identified as “loss making” stores that had no prospect of returning to profitable levels. The hope is that the decision will allow the business to improve, whilst ongoing discussions regarding saving the business continue.
What does “Administration” mean?
In short, a company goes into administration when it no longer has enough money to meet its debt obligations, expenses and other liabilities. It has essentially become insolvent. The company is under the control of a licensed insolvency practitioner, known as an administrator.
The administrator’s role is to take control of the business’ financial decisions with the goal of salvaging as much of the business as possible.
What’s the difference between Administration and Liquidation?
The main difference between the two is that administration is used when there is still hope that the business might recover financially.
The process of administration allows the company time to resolve the situation by either rescuing it as a going concern; selling the business and thereby achieving a better outcome for the company’s creditors as a whole than would be likely if it had been wound up; or realising the assets in order to pay secured and/or preferential creditors.
What happens now?
In all cases, the Administrator’s roles will involve working with the company in order to make an assessment of its finances and recover as much money as possible. Another benefit of the administration process is that no other creditor can bring legal action, providing a temporary ‘shield’ whilst the Administrator tries to salvage the company.
At Darwin Gray, we have an excellent reputation for advising and working with insolvency practitioners, businesses, directors, creditors and individuals. Our insolvency specialists Kate Heaney and Mark Rostron provide legal advice on complex cases, manage emergency planning and make sure clients follow the correct procedures to bring matters to a close.
In many insolvency matters, it is important to act quickly. To discuss our insolvency services, contact one of our insolvency solicitors today, call us on 02920 829 100 or by using our contact form.
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