Business secretary Vince Cable says Comet demise caused ‘great distress’ and company has serious questions to answer
The government is considering a radical overhaul to the insolvency process in the wake of Comet’s collapse, according to business secretary Vince Cable.
Answering business questions from MPs, Cable said that the demise of the retailer had caused great distress and hinted that it might be necessary to rethink the insolvency after reports that administrators made millions out of the collapse. He added that a report into the affair would not be made public.
Shadow business secretary, Chuka Umunna, said private investment firm OpCapita, which owned the failed electrical retailer, had “very serious questions to answer” after the company closed its doors this week with the loss of nearly 7,000 jobs.
He was particularly concerned “given that in less than a year the owners appear to have lost the £50m dowry they received to buy the business and left the taxpayer with a £49.4m bill”.
Cable agreed: “I take these allegations very seriously and that’s why I’ve asked my department to conduct a thorough enquiry with the powers they have.”
However, he revealed that the report would remain secret under the 1985 Companies Act, which says that “information gathered during the course of an investigation is confidential, and criminal penalties attach to its unlawful disclosure”.
He added: “This episode reveals wider possible failures in the system and there may well be better ways of handling insolvency, though I think it’s fair to say in general the British insolvency regime is regarded as one of the best internationally.”
The total payment to administrators and lawyers working on the Comet collapse, including accountancy firm Deloitte, has been estimated at £10.4m.
Cable added: “We are specifically going to have a look initially at a narrow issue around insolvency practitioners and their fees.
“We should be open minded to other approaches. The American Chapter 11 system may well be better and I want to have a proper look at that.”
The government will have to pay £23.2m of outstanding redundancy payments to ex-workers because a fire sale failed to make enough money.
Another £26.2m will be lost in unpaid tax to HM Revenue & Customs, which is an unsecured creditor.
Answering business questions from MPs, Cable added: “The collapse of the Comet chain has caused great distress.
“It’s not just the direct job losses, it’s the supply companies and there is a large amount of unpaid credit.”
The inquiry is being conducted under section 447 of the Companies Act, which can be a precursor to a more in-depth investigation. Investigators are allowed to demand documents, enter offices and speak to any individuals considered to have relevant information.
If wrongdoing is uncovered the Insolvency Service can seek to have directors disqualified, or, if they believe there is evidence of criminal behaviour, pass a file to the police or Serious Fraud Office.
And while the taxman is unlikely to recoup the £26.2m upaid VAT and payroll tax bill, OpCapita will receive £50m because of its position as a secured creditor.
Unsecured creditors, including landlords, suppliers and customers, will shoulder losses of £232.9m and because of complicated financial arrangements it is still not clear whether OpCapita has turned a profit from the deal.