...leaving a company on “life support”
The Work and Pensions Select Committee has published a report on the failure of high street brand BHS, which includes damning accusations about the role of Sir Phillip Green and the “manifestly unsuitable” Dominic Chappell.
Reviewing the outcome of multiple select committee inquiries, Arif Khalfe – Partner and Team Leader of Commercial Disputes – looks at how the so-called “King of the High Street” has become a figure of scorn for the retailer’s failure.
“Unacceptable face of capitalism”
In a withering report Sir Phillip Green has received the majority of condemnation for the running of BHS, which is alleged to have caused the British retailer to go into administration with a pension deficit of £571 million.
Laying blame on the erroneous management of Sir Phillip Green, the report makes a number of accusations about the potential cause of the store’s collapse, including:
• Sir Phillip Green purchased BHS for £200 million in 2000 and sold it for just £1 14 years later
• At the time BHS was purchased by Sir Phillip the pension scheme was in a surplus, it soon declined into substantial deficit, which currently sits at £571 million
• Sir Phillip systematically extracted hundreds of millions of pounds, paying very little tax, to fantastically enrich himself and his family
• Sir Phillip’s wife continues to be paid tens of millions of pounds of tax free repayments on a loan that was engineered to sell BHS from one Green family business to another
• A failure to invest in the company, causing it to become uncompetitive in a shrinking retail industry
The accusations against Sir Phillip and his family are extensive. The billionaire has responded by threatening to sue MP Frank Field, who is the Head of the Committee, for defamation in relation to the language he has used to describe Sir Phillip’s running of BHS.
With calls to strip the retail mogul of his knighthood accompanying the publication of this damning report, it is likely that Sir Phillip Green will look to co-operate with the report’s recommendation, which could see him contribute cash to save some of the BHS pension scheme.
“Incompetent and self-serving” buyer
Extending its scorn beyond Green’s own management of BHS, the report also looks at Dominic Chappell and his Retail Acquisition Ltd, which bought the company for just £1 in 2014.
The language used to describe the brand’s new owners is no kinder than that reserved for Sir Phillip, as Dominic Chappell and his associates were described as “incompetent and self-serving”.
The report has shone a light on a transaction that saw BHS end up in the hands of a “twice-bankrupt chancer with no retail experience”.
It was claimed that Sir Phillip – whose other retail enterprises include Topshop and Dorothy Perkins – did not adequately research new owner Dominic Chappell, with BHS being “hurriedly sold to a manifestly unsuitable” buyer.
The MPs report was preceded by months of speculation and accusations, with The Guardian claiming that a third of an £8.4 million BHS loan went to four directors of Retail Acquisition Ltd, just days after the sale of the store was finalised.
Gaps in Company Law
The Committee investigating the collapse of BHS, who saw Sir Phillip and Dominic Chappell submit evidence in recent weeks, says that the story of the chain’s demise highlights wider questions about the gaps in company law and pension regulation.
Commenting on the story, Arif Khalfe says:
“In the media circus surrounding Sir Phillip and Dominic Chappell it is easy to forget the everyday employees who are facing redundancy because of BHS’ collapse.
“While uncertainty surrounds their pension fund, employees may want to explore their legal rights for making a claim if they cannot access the funds they are entitled to.
“The Committee’s report goes a long way in explaining the reasons for BHS’ collapse but without an outright ruling on the pension fund deficit, uncertainty remains among those affected.
“It is likely that Sir Phillip is feeling betrayed by the MPs’ report, especially as his expertise was sought out by Government just 6 years ago, as they asked him to carry out a review of spending and procurement.
“The legal implications of this report could be twofold, firstly the Committee has suggested that current company law and pension regulation has gaps – which means policy could be drafted to fill those gaps – and secondly there are reports that Sir Phillip could bring a defamation case against the Chair of the Committee, the outcome of which would be well worth keeping an eye out for.”
Written by Arif Khalfe
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