It's been reported that the board of directors of AIM-listed Patisserie Holdings plc, which owns the Patisserie Valerie chain of cafés, was not aware for almost a month that HMRC had filed a petition at the High Court of England and Wales to wind up its main trading subsidiary, Stonebeach Limited. The petition, filed on 14 September, was publicised in the London Gazette on Friday 5 October 2018, but the board announced on Wednesday 10 October that it had only learnt of its existence that day. Whilst this isn't confirmed, it is likely that a copy of the petition will also have been served at Stonebeach's registered office or delivered to its solicitors.
Time is of the essence
Whilst a delay of five days might not sound like much, those few days can be of pivotal importance, both in financial and reputational terms. In the case of Patisserie Valerie, the business was already making headlines after announcing early on Wednesday 10 October that it had been notified of "significant, and potentially fraudulent, accounting irregularities" on Tuesday 9 October, and that its finance director had been suspended (he has since reportedly been arrested and released on bail). Trading in its shares was also suspended.
It announced only hours later that the board had since become aware of HMRC's winding up petition, seeking £1.14 million in unpaid taxes.
Had the board been aware of the insolvency proceedings sooner, it might have been possible to engage in discussions with HMRC and agree a resolution quickly. Now, with everything emerging at the same time, the business is having to battle on several fronts simultaneously. The entrepreneur who owns 37% of shares Patisserie Holdings plc has recently agreed to lend £20m to the company in an effort to enable it to continue trading, after the directors warned on 11 October 2018 that:
"Without an immediate injection of capital, the Directors are of the view that that is no scope for the business to continue trading in its current form."
Take steps now to be prepared
All business should make sure that there is always someone on site, whether that is the head office or any premises at which business is conducted, who knows what to do if court papers, whether a petition or any other kind of court writ, are served. It is particularly important to make sure front of house staff are trained in how to respond.
Our recommendations on how to respond on receipt of court papers are:
- Immediately scan in the papers and save an electronic copy, with a back up, in case they are mislaid.
- Ensure the papers are placed in the hands of a director or senior manager/authorised person in the business. Avoid simply emailing someone to let them know - they might be on holiday but have forgotten to change their out of office message. Some court actions have very short periods in which you need to respond.
- Contact a solicitor immediately to get advice on next steps.
- The worst thing to do is bury your head in the sand - if you ignore court papers, the court may grant orders against you in your absence.
Extra protection in Scotland
In Scotland, it is possible to receive advance notice of someone trying to raise certain court orders against you or your business, including petitions by HMRC (or anyone else) to wind-up your business (put it into liquidation).
As set out in Louise Usher's blog on caveats from earlier this year:
"Caveats are an 'early warning system' peculiar to Scotland. Wherever a caveat is lodged in the name of a party, that court must give that party's solicitor advance notice (although this may only be 24 hours or so) before any application for an interim court order against that party can be heard, so that the party has the chance to attend the hearing and oppose the order.
Without the caveat,no noticeof the hearing would be givenand there would be no opportunity to oppose the application. In those circumstances, the court ordercan be granted in the party's absence."
So if Patisserie Valerie had been a Scottish-headquartered company with caveats in place, and HMRC had chosen to lodge their winding-up petition in the Court of Session, their solicitor would have received a telephone call from the court immediately on the petition being lodged, before the petition could have been served or advertised. That would have saved valuable time.
How can we help?
We recommend that anyone doing business in Scotland (even if the registered office of your company is elsewhere) lodges caveats in all Scottish courts in which a court action could realistically be raised against your business. This could be the local court for any branch office, manufacturing site, or shop.
We can arrange for caveats to be lodgedatcourts throughout Scotland, anda solicitor from Brodies' Dispute Resolution team is always on callin case acaveat is triggered. Caveats last for one year once lodged. We also employ a free renewal monitoring system, to ensure that your caveats, once lodged, do not expire, by contacting you annually to seek instructions to renew them.