Published on July 25th, 2014 | by The GC Team0
UPDATED: Cable to launch probe into Comet liquidators
Further to this morning’s report on GC’s website, Business Secretary Vince Cable has today, as expected, officially announced that the Insolvency Service has referred the administrators of failed high street retailer Comet to their regulatory body for consideration of whether disciplinary action is appropriate on two grounds, following an 18-month investigation.
Christopher Farrington, Nicholas Edwards and Neville Kahn, insolvency practitioners (IPs) at Deloitte, were referred to the Institute of Chartered Accountants in England and Wales (ICAEW).
The referral relates to a potential conflict of interest when the three IPs, whom had previously advised the company and connected parties, accepted their appointment as administrators of Comet following its collapse in 2012.
An Employment Tribunal later found that employees had not been consulted on the potential for redundancies as legally required, leading to a potential compensation package of up to £26 million which will be borne by the taxpayer.
In his announcement today, the Business Secretary said: “The taxpayer now faces a multi-million pound compensation bill as result of the failure to consult employees. There can be no excuse for failing to comply with the law which is very clear in this area. It is vital that the regulator establishes why this happened and whether disciplinary action against the administrators is appropriate.
“There are also important issues of possible conflicts of interest which need to be fully considered.
“Cases such as these reinforce the need for a stronger insolvency regulation regime which will give us new powers to ensure regulators take firm action where abuse is found. The Bill I am currently taking through parliament will ensure these changes to current law are made.”
The ICAEW has a number of sanctions at its disposal where it finds sufficient misconduct, ranging from a warning, reprimand or fine to licence withdrawal.
The Insolvency Service announced the start of a Section 447 investigation into the circumstances surrounding the insolvency of Comet in 2012. The investigation is still ongoing.
Comet went into administration with approximately 6,000 staff in 236 stores. There were insufficient funds for the administrators to make redundancy payments, which were later met by the government.
The Insolvency Service’s Redundancy Payment Scheme has paid £18.4 million in redundancy fees to 4,838 ex-employees of Comet.
In addition, in June this year the Employment Tribunal made a Protective Award of between 70 and 90 days because of inadequate consultation with employees prior to them being made redundant as required by law. This has a potential cost of £26 million to be paid from the National Insurance Fund.