Ted Baker: High Street Giant in Administration

Ted Baker is a name and brand that most people will be familiar with. Founded in Glasgow, it has been a part of the UK high street and online fashion markets for decades. It was purchased in 2022 by Authentic Brands Group – which also owns other well-known brands such as Reebok and Hunter – in a reported £211m deal.

It has not been immune from the recent financial struggles experienced by the retail sector however and, as has been widely reported, No Ordinary Designer Label Limited (NODL), which runs Ted Baker’s UK-based stores and website, entered administration in March of this year. Administrators from Teneo have been appointed to oversee the administration process.

The reasons for NODL entering administration have been reported as the company having “built up a significant level of arrears” during a financial arrangement with a Dutch firm and that the damage done “was too much to overcome”.

But what does all this mean and what happens next, especially for Ted Baker’s 46 UK-based stores and 975 employees?

What is administration?

Administration is the process by which independent financial advisors are appointed to reorganise the company and/or realise the company’s assets.

In the majority of cases, companies that enter administration are insolvent, which means they are not able to pay their debts as they fall due. In short, they are in financial difficulties.

One of the main benefits to a company entering administration is that it is afforded the protection of a statutory moratorium. This means creditors cannot take action against the company to enforce any claims it may or may not have. The rationale for this is to allow the administrators to realise the relevant assets and/or reorganise the company without such pressures.

What happens next? What are the possible outcomes?

First, an administrator must be appointed. The administrator must be a licensed Insolvency Practitioner and must be independent from the company. The administrator takes over control of the company from its directors and is responsible for the reorganisation and/or realisation of the company’s assets.

The administrator must carry out their functions in the interests of the creditors as a whole and must perform those functions as quickly and efficiently as is reasonably practicable.

One of the administrator’s key initial tasks is to set out how they propose to conduct the administration (the “Proposals”). The Proposals must be sent to the relevant parties, including creditors of the company, within eight weeks of appointment.

Amongst other matters, the Proposals must address which of the statutory purposes for administration the administrator intends to achieve and how the administration process will end once that has happened. There are three statutory purposes, which are:

1.      Rescuing the company as a going concern – this is known as the primary purpose.

2.      Achieving a better result for the company’s creditors as a whole than would be likely if the company was wound up.

3.      Realising property to make a distribution to one or more secured or preferred creditors.

In the case of Ted Baker, the reports to date suggest that the company is to continue trading as normal (or as close to normal) whilst a resolution is sought. As such, it is possible that the administrators will be seeking to rescue the company as a going concern.

In trying to achieve this, the administrator has several powers afforded to it under the Insolvency Act 1986, which include:

• Taking control and possession of the company’s property.

• Selling assets.

• Bringing and/or defending legal proceedings on behalf of the company.

• Making necessary payments.

• Carrying on the company’s business.

• Investigating and, if necessary, applying to the Court to set aside transactions at an undervalue, preference payments and transactions, and transactions defrauding creditors.

The administration process can end in several ways, the most common being:

1.    Unless it is extended, it will end 12 months from the day that the company entered administration.
2.       If the company entered administration without the Court’s involvement, the administration can be terminated relatively easily by the administrator once the purpose has been achieved.
3.  Alternatively, the administrator can apply to the Court to end the administration.

In relation to Ted Baker, it is still very early days and we cannot know what the end result will be. However, reports suggest that the company will continue to trade – at least in the immediate future – are encouraging and the hope is that some or all the business can be rescued.

Conclusion

The recent examples of retail giants entering into administration shows that no company is immune to financial pressures and the other pressures facing businesses following the COVID-19 pandemic and the ongoing difficult financial landscape.

If your business is facing financial difficulties, do not hesitate to reach out to the relevant professionals to seek help – time is of the essence and the earlier action is taken, the more options you are likely to have.

If you, your business, or a client requires legal assistance or advice in relation to administration or insolvency generally, do not hesitate to reach out Geldards LLP’s specialist Insolvency and Commercial Dispute Resolution practitioners who will be able to assist.