Debenhams: Judge’s Refusal to Appoint a ‘Provisional Liquidator’

Frasers Group PLC has failed in its bid to trigger a premature investigation into the financial affairs of the commercial retailer, Debenhams. Frasers Group PLC owns nearly a third of Debenhams’ shares and in their capacity as creditors, an application was made in the Insolvency and Companies Court to appoint a ‘provisional liquidator’ who could begin inquiries into Debenhams’ financial affairs.

Why did the Judge dismiss Fraser Group PLC’s application?

Judge Mark Mullen considered and dismissed the application at a remote hearing on the basis that neither Debenhams’ shareholders nor their creditors were given notice of the application. Judge Mullen further stated that he did not consider the appointment of any ‘provisional liquidator’ to be urgent in the circumstances where there was no evidence to suggest that Debenhams’ assets or documents needed to be secured.

The Judge did, however, state that he would reconsider the issue at another hearing in the near future and informed the parties that he wanted the application to be ‘known about’, thereby emphasising on the important concept of providing notice to the relevant parties in relation to certain insolvency applications.

What has happened to Debenhams during lockdown?

The commercial retailer Debenhams has closed down five of its stores in Hammerson shopping centres leading to potentially 1,400 job cuts due to the failure to agree rent terms with the mall operator. This brings the total store closures to 16 since Debenhams fell into administration. Debenhams said in a statement:

“We can confirm that despite our best efforts, we have been unable to agree terms with Hammerson on our five stores in its shopping centres, and so they will not be reopening”

Debenhams

However, Debenhams still continue to engage in “constructive talks” with their landlords to agree terms on rent for a vast majority of their stores.

Why are retailers like Debenhams struggling to pay rent?

Many retailers like Debenhams have being issued with winding up petitions by their commercial landlords to recover unpaid rent. Over the last 12 months Debenhams has been in administration two times which has caused the company a huge loss and fall in sales.

In April, an industry body said that British retailers suffered their biggest fall in sales since the 2008 financial crisis in the first half of April as the pandemic forced store closures.

Fashion retailers like Oasis Warehouse Group and Laura Ashley Holdings also went into administration during the UK lockdown.

How can we help you oppose a winding up petition?

As a leading law firm with a track record of success, you can be assured that your matter is in safe hands. Our success rate is a result of the dedication of our lawyers who will diligently review your matter so it has the best possible chance of success from the outset when it matters the most.

If your company is concerned about a winding-up petition or statutory demand from a commercial landlord your company can potentially challenge that petition on the following grounds:

  1. That the debt alleged in the statutory demand or petition to be owing is genuinely disputed on substantial grounds by your company;
  2. Your company has a genuine right of set-off against the creditor that exceeds the amount claimed in the statutory demand; or
  3. In certain other limited circumstances (for example such as jurisdiction, technical or procedural error or delay).

In order to oppose a winding-up petition, you would need to file a witness statement in opposition with the Court no fewer than five business days before the date when the petition will be heard by the Court (rule 7.16 of the Insolvency (England and Wales) Rules 2016). You would also need to provide a copy of that witness statement to the petitioning creditor at least five business days before the hearing.

Your company is entitled to appear at the petition hearing and to oppose the making of a winding-up order. It is usual for companies to instruct solicitors and/or barristers to appear on their behalf at the petition hearing.

Instruct Specialist Insolvency Lawyers

We provide a no cost initial case review to establish whether or not we can help you. We are a specialist City of London law firm made up of Solicitors & Barristers and based in the Middle Temple Inn of Court adjacent to the Royal Courts of Justice.  We are experts in dealing with matters surrounding insolvency in particular issues.  Our team have unparalleled experience at serving statutory demands, negotiating with debtors/creditors, setting aside statutory demands and both issuing and defending winding up petitions vigorously at the Royal Courts of Justice (Rolls Building), or the relevant High Court District Registry or County Court with jurisdiction under the Insolvency Rules

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