Memorandum submitted by Mark Skingley
I saw the piece on Newsnight about pre-packs
and felt compelled to write. I have thought long and hard about
whether to write but feel you should understand exactly how pre-packs
are abused.
The murky business of pre-packs is being abused
by IPs and Directors to their mutual benefit and to the obvious
detriment of creditors and shareholders. It is a practice that
is used to take out shareholders and allows Directors to take
a business and restart with a new board, new rshareholders and
no creditors. And all this is done with the protection of the
courts. It is argued that the business survives and jobs are saved.
This is undoubtedly true in some circumstances but in my view
the minority and the scale of abuse and the devastation it reaps
is a cost that needs to be addressed.
I have been on thereceiving end of a pre-pack
and as a result I have no capital, no job and my shares are worthless
but I am still standing. In brief, I started a business in 2003
with two other people and it grew to 18 people and we had customers
such as BT, O2, T-Mobile, Orange, KPMG, Rexam etc. We had a good
team and were self funded; I had funded the business but split
the equity equally with the other Directors and put the money
in as a Directors loan. In 2007 we sought some outside equity
to broaden the base and appoint some non-execs. After a short
time we had some non-execs and a couple of potential investors,
one who was interested in being more involved on a part time basis.
However, after some time it became apparent that he had other
ideas and co-opted the other two directors.
I returned from a weekend visiting my father
who had just been diagnosed with an aggressive cancer to be told
I had been suspended and no reason was given. It was April 2007
and 4.5 years work later and I was suspended from a company I
had founded, was the largest shareholder (38%) and the largest
creditor. I was shell shocked and what ensued was a legal nightmare
when they refused to reply to letters and I was put through a
completely farcical "internal disciplinary process"
that was described as as such by the Employment Tribunal. I was
suspended on full pay and was not paid a thing. After one of the
Directors faked an illness to avoid the Tribunal in November,
it was adjourned and again in January 2008 with a date set finally
for July 2008. I had prepared a case for unfair and wrongful dismissal
and illegal deduction of salary and a High Court case to recover
my debt (£196k). Then in April 2008 I got a call from Simon
Thomas at RSM Bentley Jennison who informed me that the company
was to be put into administration and did I want to buy back the
assets; assets that I had already paid for once. I explained in
great detail that he should not take this on and my solicitors
explained the context but he persisted and they bought back the
assets and continue to trade to this day.
I won at the Employment Tribunal, it was held
I was wrongly and unfairly dismissed and their conduct was torn
apart. I was awarded £96k but have not received a penny.
When RSM Bentley Jennison was appointed Simon Thomas made the
point of explaining that once the company went into administration
he would be working for the creditors. I now find myself seriously
questioning his conduct. I have had the case reviewed by another
IP and he has made a catalogue of errors, the first was not inviting
me to the creditors meeting and thereby denying me any input into
the appointment process and level of fees. The result is I have
been unfairly prejudiced as a creditor. At the same time they
have billed 46 days or £76k as fees (in addition they charged
a pre-appointment fee of £22k) and as a result there is no
money left to distribute to creditors. The conduct of the Directors
has not been investigated despite ample evidence that they ripped
cash out immediately prior to the administration, paid key suppliers
in preference and invoiced services provided by the old company
in the new company. I am vigorously pursuing these issues and
intend to write to their professional bodies should I get no satisfactory
answers.
I am happy to accept that public policy must
put in place legislation to allow companies to re-group and re-organise
in some situations and that saving jobs is a valid reason. However,
there appears to be a lack of balance and very little policing
of abuse and abuse is rife.
I hope this has not been too lengthy or tedious
but it is an example of the sharp practice that seems to be prevalent
amongst IPs and the abuse of a process that is necessary but in
diar need of reform. I have included my contact details below
and would be happy to discuss any of the above should it be of
help in understanding the issues. As for me I am hopeful for the
future and not too down trodden but I am concerned that Directors
can use the system to manipulate circumstance and take out shareholders
and creditors with no apparent recourse but significant personal
gain.
February 2009
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