Learning from the collapse of BHS

Learning from the collapse of BHS

Following publication of the Work and Pensions and Business, Innovation and Skills Committees’ report on the collapse of British Home Stores, Ian Defty, insolvency practitioner at DDJ Insolvency Limited, considers what lessons can be learnt.

What were the main failings that the committee highlighted?

The committee has been scathing over the ‘directors, advisers and hangers-on’ of BHS. They raised concerns over the sale of BHS, the lack of oversight or challenge over decisions made, and the lack of checks made regarding the sale and the incentivising of advisers. The committee goes on to specifically identify failings in the dealing of property leases, the general underperformance of BHS and the ‘lavish’ rewards the directors took. The committee expressed support for the forthcoming, or ongoing, investigations by the Financial Reporting Council, the Pensions Regulator (TPR), the Insolvency Service and the Serious Fraud Office.

What are the lessons for future restructurings or sales of distressed businesses?

Over recent years we have seen our high streets and out of town shopping malls change dramatically with the loss of retail stores such as Woolworths, C&A, MFI and now BHS. There are fewer of these large concerns in the UK than ever before, but as such there are fewer companies that are around for restructuring and/or sale. Every time there is a ‘large’ failure, restructuring or distressed sale, lessons are learnt for lenders, landlords, institutional creditors and others. While it was a shock that another brand company failed, a well-trained and supported process will have fallen into place using lessons learnt from earlier failures. Current companies need to look carefully at their corporate governance, the role of the non-executive director needs to increase to question directors’ appointments and the decision-making process in large and unusual transactions.

Do you think there will be changes to the laws on directors' duties, given the criticisms of Sir Philip Green's actions?

No. Those in and around the business community have been debating for many years on introducing education for company directors—at present there is no education of any kind. Successive governments have steered away from bringing in such education or training due to the perceived additional costs to new companies and therefore the perceived stifling of enterprise. Do I personally think that company dir

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