The importance of good administration advice has been highlighted once again, with the news that the collapse of electricals retailer Comet is to be investigated by the Institute of Chartered Accountants in England and Wales.
During the failure of the company, certain core elements of administration advice were reportedly not carried out correctly – such as the need to discuss redundancy options with the company’s employees.
Failing to do this as legally required led to a subsequent employment tribunal, and a £26 million compensation package which must ultimately be paid for by the UK taxpayer.
Business secretary Vince Cable said: “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.”
However, it is worth noting that regulatory action is already being taken in this case, suggesting that the existing regime may already be sufficient.
We would suggest that the important lesson to be learned is the value of good and correct administration advice, so that in major collapses like Comet’s, employees, creditors and all other interested parties are given access to the information to which they are legally entitled.
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